Hong Kong market sentiment recovers slightly due to the US Federal Reserve's bailout plan. Europe's top lender HSBC climbed 5.9 percent and Standard Chartered bounced back 10.5 percent after being hammered on Monday for its planned $2.69 billion rights issue. China Daily

Hong Kong shares rose 3.81 percent yesterday after the local market reacted positively to the US Federal Reserve's latest rescue plan.

Backed by the Fed's latest $800-billion rescue plan, banks and exporters surged yesterday with US-focused consumer exporter Li & Fung jumping 7.7 percent.

Europe's top lender HSBC soared 5.9 percent and Standard Chartered bounced back 10.5 percent after being hammered on Monday for its planned $2.69 billion rights issue.

The benchmark Hang Seng Index closed up 490.85 points or 3.81 percent to 13,369.45.

Mainboard turnover rose to HK$41.7 billion from HK$41.2 billion at midday on Tuesday.

The China Enterprises Index, consisting of top locally listed mainland firms, surged 4.2 percent to 6,934.11.

More talks on possible interest rate cuts on the mainland pushed China Construction Bank up 4.3 percent, while top lender Industrial and Commercial Bank of China surged 2.7 percent.

Meanwhile, metal producers also benefited from the decision by BHP Billiton to abandon its deal with rival Rio Tinto, a mega-merger which would have created a global mining giant. Aluminum Corp of China rose 8.5 percent yesterday,s thanks to the news.

Chinalco, the company's parent said it planned to increase its holding in Rio Tinto to at least 14.99 percent from 12 percent at present.

Mainland steelmakers joined the brigade around the world after being relieved by the news of the dropped deal that could have controlled a third of the world's sea-borne trade in iron ore. Angang Steel jumped 13.3 percent.

The People's Bank of China yesterday announced that its key one-year lending rate will drop 108 basis points to 5.58 percent and the deposit rate will fall by the same amount to 2.52 percent and this will take effect from Thursday.

The massive interest rate cut may give certain shares a boost, but some analysts thought it may be short-lived.

"It may push up the prices for banking and property shares but it will not last," Patrick Shum, senior analyst at Karl Thomson, said. "The interest rate cut sends out a bad signal that our economy is getting worse. The steps may not necessarily help ease our concerns about deteriorating economy because we have a structural problem. For example, the property problem on the mainland was caused by oversupply."

(HK Edition 11/27/2008 page2)