Investors are clearly elated Thursday to see their stocks rise for a third straight day after Monday's massive loss dragged the market to nearly a third of what it was on Oct 30, 2007. AP

Hong Kong shares rallied for a third straight day yesterday, surging 12.84 percent after another round of rate reductions worldwide.

Still, the main index is less than half of what it was on the same day a year ago. Shares surged across the board, with global lender HSBC leading the charge and commodities stocks gaining after the central government lowered borrowing costs.

Cement producer China National Building Materials rocketed 85 percent. UBS said the highly leveraged company would benefit from interest rate reductions, which will help mitigate its financial risks.

"Certainly, the strong buying that we see today is on the back of the rate cuts. That's the big story right now," said D Gorton, a research analyst at Louis Capital Markets (Hong Kong). "This is an opportunity to buy, because a lot of companies are undervalued."

The benchmark Hang Seng Index (HSI) closed up 1,627.78 points to 14,329.85, with energy stocks such as PetroChina helping to fuel the rally. The index has risen 30 percent from a four-and-half-year closing low recorded on Monday.

The main index hit a high of 31,958.41 on Oct 30, 2007.

"A lot of the gains are in lieu of the futures expiry later today, and the bounce in other regional markets," said Y K Chan, a strategist with Phillip Securities.

Other regional markets soared, with South Korea's KOSPI up 12 percent - its biggest one-day gain ever - and Japan's Nikkei average up 10 percent.

The China Enterprises Index of top locally listed mainland companies surged 16.9 percent to 6,764.04, tracking gains in the Shanghai market.

Mainboard turnover jumped to HK$75.1 billion from HK$66.1 billion on Wednesday.

China Overseas Land Investment gained 19.4 percent after the central bank slashed interest rates by 27 basis points for the third time in six weeks.

The United States, Hong Kong and Taiwan also cut rates.

Most bank stocks rose, with HSBC jumping 10.7 percent, China Construction Bank surging 19.2 percent and China Merchants Bank rallying 15.1 percent after it posted a 49.5 percent increase in third-quarter earnings.

But BOC Hong Kong, the local unit of China's second-largest lender, bucked the trend to sink 1.3 percent after it took a HK$3.2 billion hit in impairment charges on investments in mortgage-backed securities and unsecured debt.

Both JPMorgan and Credit Suisse downgraded the stock to "neutral" from "overweight".

HSBC and other lenders operating in Hong Kong kept their rates unchanged, even after the Hong Kong Monetary Authority slashed its base rate by half a point.

Resources stocks also surged after global stocks rebounded and a weaker US dollar propped up commodity prices.

China Shenhua, the world's most valuable coal miner, jumped 20.1 percent, building on Wednesday's steep gains after it reported a 48 percent increase in third-quarter profits. Rival China Coal Energy gained 19.3 percent, while Yanzhou Coal shot up 30.1 percent.

China COSCO, the nation's largest shipping conglomerate, soared 41.4 percent after posting a 19 percent increase in its third-quarter earnings.

Reuters

(HK Edition 10/31/2008 page2)