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HK stocks close higher, driven by China Telecom

HONG KONG: Hong Kong stocks finished Friday sharply higher led by China Telecom (Hong Kong) and helped by strong interest in banking and hotel stocks.

The benchmark Hang Seng Index rose 268.13 points or 1.68 percent to end at 16,185.94. Over the past three trading days, the Hang Seng has jumped just over seven percent.

Almost half the rise came from heavyweight China Telecom which contributed 124.10 index points, according to Reuters 3000.

"China Telecom's rise was largely a response (to news) that Morgan Stanley are reviewing the China weighing," said Dylan Tinker, telecoms analyst at Deutsche Bank.

China Telecom extended Thursday's eight percent jump on expectations it would be included in the Morgan Stanley Capital International (MSCI) China Free Index. It ended up HK$2.00 or 3.98 percent at HK$52.25.

On Thursday, Morgan Stanley said it was reviewing the composition of the MSCI Free Index, to be more reflective of the China market. The MSCI, which includes mainland B shares, Hong Kong-listed H-shares and New York-listed N shares, is used by fund managers to allocate assets and measure performance.

"The market has been driven ahead by the likes of Hutchison and Cheung Kong, which are still gaining on the back of investors realising the potential of technology and internet-related investments coming to the market," said Jerry Pang, institutional sales manager at HSBC Securities.

Blue chip Hutchison Whampoa Ltd, and its parent Cheung Kong Holdings Ltd, continued their gains of the week after Hutchison announced an alliance with U.S. Internet company Priceline.com on Wednesday.

Hutchison jumped 3.52 percent or HK$4.00 to HK$117.50, a climb of almost 13 percent over the past three trading days. Cheung Kong added 1.48 percent or HK$1.50 to HK$103.00.

Stuart Cook, director at Jardine Fleming Securities, said the counter was also helped by speculation that Vodafone AirTouch Plc may soon succeed in its proposed takeover of Germany's Mannesmann AG.

Hutchison has a 10.2 percent stake in Mannesmann and stands to reap a big windfall if a deal goes through. Interest rate-sensitive stocks like banks and property that have underperformed the market lately also rallied. Banks start reporting their earnings next week and as the "technical overhang" from the Federal Reserve meeting in the U.S. on February 1-2 subsides, investors are putting their money back into banks, Cook said.

"Global rate raises have been factored into the market," said Pang.

Blue chip Dao Heng Bank jumped 4.89 percent or HK$1.80 to HK$39.00. HSBC Holdings led banking stocks earlier in the day, and closed up HK$1.75 at HK$94.75 after adding almost four percent on the London market overnight.

The Bank of East Asia Ltd reports its results for 1999 on February 1 and Hang Seng Bank Ltd and HSBC Holdings Plc report later in the month. Tai Fook Securities said in a report on Friday it expected the operating environment for banks to improve in the latter half of the year, with greater demand for credit.

Hotels gained, with the hotels sub-index rising 5.19 percent to 3,222.63.

Hotel chain Shangri-La Asia Ltd soared 9.49 percent or HK$0.75 cents to HK$8.65 while shares of the Far East group of companies also rose sharply.

Analysts and traders speculated a Far East unit could be a target of a technology-related backdoor listing or asset injection.

Far East Holdings International Ltd rose the most, adding 317.91 percent or HK$2.13 to HK$2.80. -Reuters