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HK stocks end higher, HSBC leads banks up

HONG KONG: Hong Kong stocks ended higher on Wednesday with HSBC Holdings Plc leading banks upwards as investors followed their US counterparts by selling tech and telecom-related shares in favour of market laggards.

The benchmark Hang Seng Index which slumped on Tuesday after a sell-off in telecom-related blue chip companies, ended 2.13 percent or 355.23 points up at 17,043.39. HSBC Holdings led the Hang Seng and the banking group up. It jumped 5.41 percent or HK$4.75 to HK$92.50 on turnover of HK$1.6 billion, around six percent of total market turnover of HK$26.62 billion. On Tuesday turnover was HK$35.74 billion.

"Banks which were led down after the threat of higher interest rates were down at bargain basement prices," said Richard Offer, head of regional sales at Dresdner Kleinwort Benson Securities.

After reaching a high of HK$111.50 on January 3 HSBC Holdings fell almost 23 percent to a low of HK$86.25 in on Tuesday's trade.

Similarly the Hang Seng finance index, which includes, Hang Seng Bank Ltd, Bank of East Asia Ltd and Dao Heng Bank Group Ltd, has dropped 21 percent since January 3 to its low on Tuesday.

Traders said banks, which have underperformed the market as investors bought high-flying technology stocks, are now at a good price to buy, particularly since their cost of funding remains relatively inexpensive despite rising interest rates.

The benchmark three-month rate was 6.03947 percent at 1130 local time, slightly lower than on Tuesday. On Wednesday the finance index soared 5.45 percent from on Tuesday's low levels. Dao Heng Bank Group rose HK$1.90 to HK$31.70 while Hang Seng Bank added HK$4.50 to HK$75.75.

Investors were anticipating better results for banks when they report, said Howard Gorges, director at South China Brokerage.

He added that the Hong Kong market was following Wall Street, where investors took profit from market leaders on Tuesday, buying out-of-favour stocks.Cable & Wireless HKT (C&W HKT) and Pacific Century CyberWorks (PCCW) both fell on Wednesday as investors await news on PCCW's proposed bid for Hong Kong's largest telecoms carrier.

"Both PCCW and C&W HKT are giving a little bit back since both have obviously jumped up so much," said Jerry Pang, institutional sales manager at HSBC Securities.

While speculation swirled on Wednesday over possible partners for PCCW's bid for several big Asian telecom players denied involvement or comment.

PCCW lost 3.79 percent or HK$1.00 to HK$25.35, while C&W HKT dropped 2.44 percent or HK$0.60 to HK$23.95.

Adding to its war chest, PCCW announced that underwriters of its latest share placement would fully exercise an overallotment option, bringing the total deal to 335 million shares at HK$23.50, netting total proceeds of HK$7.704 billion (US$990 million).

Property developers and utilities were in favour on Wednesday, with "bargain-hunting going on in stocks which have languished to low levels", said Gorges.

Hutchison Whampoa Ltd and Sun Hung Kai Properties Ltd both closed higher. Hutchison finished up HK$4.50 at HK$128.50.

CLP Holdings Ltd rose for a second day and helped push the utilities index up 6.26 percent. CLP jumped 9.55 percent or HK$2.80 to HK$32.10. Internet portal developer e-Kong Group Ltd was the third most actively traded stock on Wednesday behind PCCW and HSBC Holdings, jumping 12.57 percent or HK$0.50 to HK$4.47. On Tuesday e-Kong said it raised HK$705 million in a share placement.

Shares of Fortune Tele.com Holdings Ltd made their trading debut on Hong Kong's Growth Enterprise Market (GEM) on Wednesday at HK$2.70 compared with their issue price of HK$2.50 each.

The distributor of Nokia, Philips and Alcatel brand mobile phones and accessories into China and Hong Kong, finished at HK$3.30.

A total of 502 issues advanced while 244 fell.-Reuters