Business

Mon Jul 07 03:19:14 PDT 2008

(Updates to close)

HONG KONG, July 7 (Reuters) – Hong Kong shares jumped 2.3 percent on Monday in their biggest gain in 13 weeks, on the back of strong advances in Chinese financials after positive earnings estimates from three banks.

Chinese banks rallied after China Merchants Bank and China CITIC Bank joined the nation’s biggest lender, Industrial & Commercial Bank of China, in forecasting upbeat earnings.

ICBC shot up 3.9 percent after it estimated profit growth of at least 50 percent in the first six months. China Merchants Bank surged 9.2 percent after saying it expected profit to double, and CITIC Bank soared 4.4 percent after it forecast a 150 percent profit increase.

Top insurer China Life climbed 5.5 percent, tracking a 4.6 percent surge on the Shanghai bourse.

Chinese real estate developers jumped after mainland newspapers hinted at a likely relaxation in the country’s aggressive credit tightening stance.

China Overseas jumped 7.8 percent and R&F Properties shot up 9.2 percent.

The Hang Seng Index closed up 489.24 points at 21,913.06 after opening slightly lower, while the China Enterprises Index of top locally listed mainland firms outperformed the broad market with a 4.3 percent jump.

Mainboard turnover rose to HK$59.9 billion ($7.7 billion) from HK$50.2 billion on Friday.

"Hong Kong shares are heavily oversold after two weeks of declines, and the positive earnings estimates from Chinese banks provided just the right excuse for investors to move in and snap up banking and property stocks," said Alex Tang, research director with Core-Pacific Yamaichi International.

The China Enterprises Index has been trading below 30 on a relative strength index, indicating an oversold position, since the start of July.

Index heavyweight China Mobile gained 1.7 percent, propping up gains in the overall market.

Sun Hung Kai Properties jumped the most in percent terms since end-March, rising 5.2 percent after Credit Suisse upgraded the stock to outperform from neutral, saying the recent correction in the stock price had more than discounted the weakness in the property market.

Offshore oil producer CNOOC gained 1.4 percent, while Asia’s biggest oil & gas company, PetroChina, rose 3.4 percent after OPEC’s president said oil prices were likely to continue their upward march on a weak dollar.

Bank of Communications, China’s fourth-largest lender by assets, advanced 4.6 percent and China Construction Bank ran up 2.5 percent.

But Bank of East Asia, Hong Kong’s fifth-largest lender, fell 0.3 percent after Morgan Stanley cut its rating on the stock to underweight from equal-weight on reduced earnings expectations for 2008

Aluminum Corp of China, one of the worst-performing stocks on the Hang Seng Index this year, rallied in afternoon trade to close 8.5 percent higher.

(Reporting by Parvathy Ullatil; Editing by Anne Marie Roantree)

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