Hong Kong blue chips rebounded into positive territory on Tuesday as investors bought oversold banks and sought safe havens in the city's utilities, driving Hongkong Electric to an all-time high. China plays also gained, but underperformed the blue chips as investors switched out of rally-weary resource issues.
The market fell as much as 2 percent in the morning, in tandem with mainland stock markets, after China said consumer price inflation in February jumped to an 11-year high of 8.7 percent. But in a reprise of Monday's turnaround, the market bounced into positive territory in the afternoon, helped by a recovery in mainland stock markets.
"It's a bit of short covering, as we've failed to break out to newer lows," said John Schofield, fund manager at Tempus Investments, adding that the market was likely to remain locked in a range for the near term.
Schofield said liquidity was still healthy in Hong Kong, as evidenced by the rotation into sectors such as banks. "People don't want to leave their money sitting in a savings account so they're looking for a reason to buy."
The benchmark Hang Seng Index closed up 1.3 percent, or 290.30 points, at 22,995.35. The resource-heavy China Enterprises index of H shares, or Hong Kong-listed shares in mainland companies, gained 0.6 percent, or 68.99 points, to 12,588.74.
Mainboard turnover was a robust HK$89.0 billion (US $11.4 billion), up from Monday's HK$87.0 billion. Global lender HSBC Holdings plc, the day's most active stock, led the blue chips for another day, rising a further 1.7 percent to HK$122.90.
HSBC-controlled Hang Seng Bank jumped 2.6 percent to HK$141 and Bank of East Asia rose nearly 2 percent to HK$42.1. Among Hong Kong utilities, Hongkong Electric jumped 5.3 percent to HK$46.85, just off an all time high set in earlier trade. CLP Holdings rose 3.7 percent to HK$62.85. Oil refiner Sinopec Corp fell further as investors worry the price freeze on refined oil products will not be lifted soon, following China's higher-than-expected inflation data.
Its shares pared earlier losses to end down 0.3 percent at HK$7.52. Among resource plays, Jiangxi Copper shed 1.6 percent to HK$16.76, amid a looming US recession and slower demand signals from China. Aluminium Corp of China (Chalco), the country's top alumina producer, slid 3.2 percent to HK$13.74.