Hong Kong shares soared 14.35 percent on Tuesday, regaining a large portion of Monday's losses to record the market's biggest daily percentage jump in 11 years.

The rebound followed a five-day, 28 percent rout that finally rendered valuations attractive to wary investors.

Shares in Europe's largest bank, HSBC, led the charge with a 20 percent jump - its biggest single-day percentage gain since October 1997. It had shed 25 percent of its market value in the previous two sessions on growing signs of trouble in emerging markets. The stock closed at HK$90 yesterday.

"The markets were completely oversold on Monday," DBS Vickers Director Peter Lai said. "With the Hong Kong market being one of the last bastions for pure short selling, we saw a lot of funds dumping US dollar-linked assets and switching to home currencies.

"But today (Tuesday), we saw the return of short covering, especially from long-term funds that find a lot of value in this market."

However, shares in property developer China Overseas Land Investment slid 8 percent after Shenzhen-listed China Vanke posted a 13 percent drop in third-quarter earnings and said it would not meet its previously set profit target.

And Guangzhou R&F Properties plunged 12.6 percent, building on Monday's massive 22.3 percent slide as support measures from the government failed to restore investor confidence in the sector. The stock fell to a record low of HK$2.43.

Still, the benchmark Hang Seng Index (HSI) closed up 1,580.45 points to 12,596.29 for its third-largest percentage gain ever.

The jump came after the index plunged 12.7 percent on Monday and lost 1,602.54 points.

The market value rose to HK$8.5 trillion, up from HK$7.6 trillion on Monday.

But the main index is still 60 percent off its all-time high from a year ago, and down 55 percent so far this year as market watchers reckon the bottom remains elusive.

"We don't know whether this is the fabled 'capitulation', because we have no idea just how far the hedge fund sector has to shrink," said HSBC analysts led by Kevin Gardiner, head of global equity strategy.

"As we'd feared, there are few places to hide. The notion of 'decoupling' was always wishful thinking in a globalized equity market, and portfolio liquidation is further making a mockery of many sectoral and regional analyses," the analysts said.

Mainboard turnover bulked up to HK$66.1 billion from HK$56.8 billion on Monday, partly helped by buying interest ahead of Thursday's futures expiration.

Shares of Bank of East Asia pared early steep losses to climb 10.2 percent after investors shrugged off a profit warning from the bank.

Reuters

(HK Edition 10/29/2008 page2)