Hong Kong stocks regained on Tuesday some of the ground lost after of North Korea said it had conducted a nuclear test, as HSBC Holdings Plc led the way after J.P. Morgan raised the lender's target price. The benchmark Hang Seng index climbed 148.46 points to finish at 17,823.70.
The China Enterprises index of mainland H shares, jumped 1.3 percent to 7,167.33, powered by financial stocks. Turnover came to HK$29.8 billion (US $3.8 billion) compared with Monday's HK$30.5 billion. "We still need to keep an eye on North Korea," said Linus Yip, strategist at First Shanghai Securities. "The major concern is whether the nuclear test will hinder fund flows into Asian markets, but it's too early to tell."
Still, geopolitical risks surrounding North Korea seemed to have abated for the moment, priming the market to test key resistance at 18,000, market players said.
"The likelihood is that there isn't going to be a war, so we're getting our risk premium back," said Andrew Sullivan, sales trading director at Daiwa Securities.
"Psychologically, the market has got to test 18,000 in the next few days, just because we're that close and haven't tested it. If we don't test it, then you're likely to see the market sell off about 300 points."
HSBC gained 1.2 percent to HK$145.70 after J.P. Morgan raised its 12-month price target for Hong Kong's largest lender to HK$163, citing a cheap valuation and "reasonable" growth. China Life, the country's largest life underwriter, was among the top gainers in the mainland financial sector, jumping 2.6 percent to HK$15.96.
Banks also rose, a day after a source told Reuters the institutional portion of China's largest lender ICBC's offering in Hong Kong was more than three times covered by Monday afternoon.
China Merchants Bank shot up 1.8 percent to HK$11.50 and Bank of Communications raced up 3.6 percent to HK$5.80, just shy of a record high set in earlier trade. Property firm New World Development sank 2.8 percent to HK$13.46 after saying fiscal 2006 net earnings fell 61 percent to HK$1.06 billion.
In its debut, Shanghai property developer SPG Land Holdings Ltd ended at HK$5.07, 6.1 percent above its IPO price of HK$4.78 after raising US $153.2 million in its Hong Kong initial public offering. Investors also bid up recent underperformers, including conglomerate Hutchison Whampoa Ltd. The firm rose 0.7 percent to HK$69.75. Sister company Cheung Kong, gained 1 percent to HK$84.15.