Hong Kong blue chips ended the year on a high note on Monday, ringing up a 39 percent gain for 2007 to make the index Asia's fifth best-performing bourse this year, and representing its best annual rise since 1999.
The benchmark Hang Seng Index hit an all-time high in late October, but has been dogged since by delays in the launch of a scheme allowing mainland Chinese to directly invest in the city's listed securities and US subprime mortgage problems.
In contrast, Japan's benchmark Nikkei fell 11 percent in 2007 - making Tokyo the world's worst-performing major stock market - while China's Shanghai Composite Index soared 97 percent.
Investors are bullish about next year, but the market could be volatile due to weak US consumption and a long-predicted slowdown on the back of China's tightening measures to cool the country's torrid pace of growth.
"There will be some rally early next year because of the long-expected US interest rate cut in January, providing strong buying support at a lower level," said Andrew To, sales director of Tai Fook Securities.
"Also, there will be some rally on China's A-share market before the Chinese Lunar New Year, which falls in early February. Hopefully they will support the Hong Kong market. "I'm quite positive on shares which have suffered big losses over the past few months. I expect the Hang Seng Index to go up to about 30,000 by Lunar New Year."
The Hang Seng Index finished Monday's half-day session up 1.62 percent at 27,812.65 on mainboard turnover of HK$43.4 billion (US $5.6 billion). It now stands 13 percent below its all-time peak hit in October. The China Enterprises index of H shares, or Hong Kong-listed shares in mainland companies, rose 0.83 percent to 16,124.72. Hong Kong's IPO market - the world's second-biggest - showed signs of slowing in the fourth quarter of this year, but is likely to be robust in 2008, with Ernst & Young projecting HK$260 billion worth of first-time stock offerings next year.
Local media have reported Hong Kong stock offerings raised about HK$287 billion this year. Property shares shot up on Monday on expectations the US Federal Reserve would cut interest rates in January.
Cheung Kong jumped 4.8 percent to HK$144.20, Sun Hung Kai Properties rose 4.15 percent while Hang Lung Properties soared nearly 6 percent. China Eastern jumped more than 6 percent and Air China shot up 7 percent after sources told Reuters on Friday that Air China's chairman had been appointed chief of China's civil aviation regulator.
China's top offshore oil and gas producer CNOOC jumped 3 percent and Asia's top oil and gas producer PetroChina rose 2 percent as oil bounced above $96 on geopolitical worries.
Top Asian oil refiner Sinopec Corp rose nearly 2 percent before closing the day up 0.68 percent at HK$11.78 after it unveiled a plan to buy interests in three oil refineries and 63 petrol stations from its parent for a total of 3.66 billion yuan.
Hong Kong's stock market rally marks the best annual gain since 1999, when investors ploughed into up-and-coming technology stocks such as then-Pacific Century Cyberworks, as much of Asia chalked up gains after the 1997/98 Asian financial crisis.