Hong Kong stocks jumped 1.75 percent on Wednesday to close at their highest level in nearly six years, following a rally in Japanese shares and a decision by the US Federal Reserve to hold interest rates steady. China Mobile led blue chips higher, surging 4.5 percent to HK$52.10, its highest level in about 5-1/2 years.
The benchmark Hang Seng index closed up nearly 300 points at 17,346.58, about 20 points above a year high set on May 8. All 33 index constituents advanced, erasing opening losses.
Turnover was HK$29.3 billion (US $3.8 billion), the highest since June 30. "This is good volume; there's a lot of cash waiting on the sidelines, waiting for the Fed to make its decision," said Tat Auyeung, fund manager at Apex Capital Management.
The Fed left rates unchanged but left the door open for more rate increases if inflation risks demanded such a move. The day's gains caught the market by surprise, with many saying the Fed decision was merely an excuse to drive the market higher and some expressed doubt that the gains are sustainable.
"This shows how much pent-up energy is in the market," said John Schofield, director at Tempus Investment. "I suspect we would go higher from here, but it's not a long-term breakout.
"We had a cautious open and a strong element of what we saw today was short-covering," Schofield said. The Nikkei average struck a two-month closing high following strong machinery orders data. "This cancels out concerns about the slowdown in the US economy and the Federal Reserve rate halt was also positive to the market," said Yuihama Hirokazu, Asia strategist at Daiwa Institute of Research.
"The upside potential is still limited, not only for Hong Kong, but for Asia - we expect a further slowing of the US economy," Hirokazu said. Telco stocks shined, with China Telecom, the country's top fixed line carrier, surging 4.6 percent to HK$2.75.
Among the day's other top gainers, Wing Lung Bank rocketed 11.1 percent to HK$75.30 after a local newspaper reported that China Construction Bank, the country's third-largest lender, was exploring the small bank as an acquisition candidate.
There were also reports that the mainland lender was interested in acquiring Bank of America (Asia). In February, China Construction Bank failed to buy out Asia Commercial Bank in February. China Construction Bank ended at HK$3.53, up 0.9 percent.