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HK stocks end higher, China Telecom up, banks down

HONG KONG: Hong Kong stocks rose on Tuesday, led by China Telecom (Hong Kong) which hit a record high in a post-Lunar New Year holiday session that was marred by a power outage.

Local telecom stocks were boosted by a record close on the Nasdaq but were offset by a slumping banking group amid interest rate concerns.

The benchmark Hang Seng Index pushed past 16,000, jumping 1.63 percent or 260.61 points to 16,228.73 by the close. "China Telecom and Internet stocks are heading up again as Nasdaq hit record highs over the last two days, while HSBC is down," said Jason Tang of institutional sales at South China Securities.

Telecom and technology stocks, which are less rate-sensitive than banks, were buoyed on Tuesday by surges on the Nasdaq over the Lunar New Year when local markets were closed.

The Nasdaq reached a record high on Monday, jumping almost two percent to close above 4,300 for the first time.

A total of 373 issues rose while 337 fell on turnover of HK$18.6 billion, up from on Thursday's HK$17.86 billion on a day when trading was disrupted for 20 minutes in the last hour by a power outage. Blue chips Hutchison Whampoa and SmarTone Telecommunications were also buoyed up by the telecoms rally.

Hutchison jumped 2.59 percent or HK$3.00 to HK$118.50 after hitting a high of HK$119.50 on expectation that the merger between Vodafone and Mannesmman could make Hutchison the largest single shareholder in the combined group with a stake of about five percent.

This would give Hutchison a huge asset to cash in for investment in new projects.

SmarTone jumped 2.29 percent or HK$0.70 to HK$31.20.

Another blue chip gainer was Pacific, which hit a year high of HK$40.50 before closing up 5.79 percent or HK$2.20 at HK$40.20.

Citic rose last week on speculation the China-baced investment conglomerate would form a joint venture with a US-based technology company.Banking stocks, whose earnings fall when interest rates rise, slumped as local interest rates are expected to rise in line with the United States, where the Federal Reserve increased rates last Wednesday.

"Banks (falling) is certainly a knee-jerk raction to interest rate rises," said Scott Blanchard, director of Asian sales trading at ABM AMRO Asia. "It's the first thing people sell."

The Hang Seng finance index fell 2.71 percent to 18,401.33, with HSBC Holdings Plc leading the group down, falling 2.47 percent or HK$2.25 to HK$89.00. "All banks are fairly weak as investors worry about the cost of funds going up and banks experience narrowing profit margins," said Jason Ho, director of sales at BNP Prime Peregrine Securities.

Money market dealers said the Hong Kong Association of Banks, which meets every Friday, was likely to raise rates by 25 basis points this week, matching the Fed's 25 basis point hike. UK interest rates are also forecast to increase by a quarter point on Thursday.

The Hang Seng Bank Ltd and the Bank of East Asia Ltd fell over three percent.

Other big gainers today were penny stocks, Ho said. "We are getting very close to a two-tier market like in the US," he said.

Pacific Century CyberWorks surged 11.39 percent or HK$2.20 to HK$21.50.-Reuters