REFILE-HK shares close at 1-mth high, led by HSBC

Mon Jul 21, 2008 4:43am EDT

(Refiles to fix spelling of Citigroup)

* Hang Seng Index posts biggest single day gain since April

* HSBC leads on CIC investment report, Citi earnings

* Chinese financials, local developers join rally (Updates to close)

By Parvathy Ullatil

HONG KONG, July 21 (Reuters) - Hong Kong shares rose 3 percent on Monday, their biggest single-day gain since early April, led by financial stocks after Citigroup calmed credit market worries with a smaller-than-expected loss for the first half.

Europe's largest bank, HSBC Holdings , jumped the most since end-March, rising 4.1 percent, boosted by a Sunday Telegraph report that said the lender had held talks with China's main sovereign investment fund over a potential investment. The stock has gained 11.5 percent in the past three sessions.

Some analysts were sceptical aboout CIC's reported interest in HSBC . They attributed the rally in HSBC to short covering after the fell to a five-month low last week, as investors prepared for further bad news from U.S. mortgage lenders and small banks.

"It doesn't make sense for CIC to invest in overseas financial institutions when nobody knows where the bottom of the credit crisis could be," said an analyst at Haitong Securities in Shanghai.
"Chinese regulators have repeatedly warned Chinese financial firms to pay extreme attention to the uncertainties of the risks of overseas markets."

The Hang Seng Index .HSI closed up 658.71 points at 22,532.90, its higest closing level since June 25.

The HSI, at 22,537, broke above the top of a downtrend channel from early May and appears to have triggered a double bottom formed by its July lows.

Mainboard turnover rose to HK$69.6 billion ($8.9 billion) from HK$59.6 on Friday.

"If the oil prices hold steady and Bank of America, which is due to announce results tonight, does not disappoint we will see this rally extending into at least another session," said Philip Chan, head of research with CAF Securities.

Asia's top refiner, Sinopec Corp , shot up 3.3 percent as oil prices held under $130 per barrel, after recording their biggest weekly decline since December 2004 last week.

Also helped by retreating oil prices, Air China , the nation's biggest international airline, climbed 2.8 percent.

Sun Hung Kai Properties , Hong Kong's leading property developer, rose to its highest level in more than four weeks on reports that the supply of residential apartments fell sharply in the second quarter. The stock gained 5.9 percent as analysts said its was recently oversold.

Hang Lung Properties joined in the rally with a 3 percent jump, while Li Ka-shing property flagship Cheung Kong Holdings rose 3.6 percent.

The China Enterprises Index .HSCE of top locally listed Chinese firms jumped 2.8 percent, in line with a 3 percent gain on the Shanghai bourse.

Mainland banks also surged, with ICBC gaining 2.3 percent and China Construction Bank jumping 2.6 percent. Bank of Communications advanced 2.7 percent and Bank of China climbed 1.8 percent.

"These stocks have been punished too much for most of last week on talk of their exposure to the troubled U.S. mortgage lenders, Freddie & Fannie," said Paul Lee, analyst with Tai Fook Securities.

The Hang Seng financial sub-index .HSNF climbed 3.6 percent.

Other index heavyweights also chipped in with hefty gains. Asia's largest wireless carrier, China Mobile jumped 2.2 percent and the mainland's top insurer, China Life , climbed 5.4 percent. Bourse operator Hong Kong Exchanges & Clearing (HKEx) rallied 4.6 percent.

Bucking the winning trend among Chinese stocks, Anhui Conch slid 6 percent after an investment bank downgraded the firm on fears that soaring energy prices would squeeze margins for the building materials sector.

On Monday, Goldman Sachs cut Anhui Conch and rival China National Building Materials to sell from neutral, citing potential difficulties in passing on climbing coal and power prices.

CNBM slipped 2.9 percent. (Reporting by Parvathy Ullatil; Editing by Anne Marie Roantree)