Hong Kong shares extended their latest rally to three days in a row by rising 1.37 percent yesterday, but closed off highs as investors locked in gains on mainland stocks.

The benchmark Hang Seng Index (HSI) once soared to 14,000 points to its two-week high in the morning trading session, supported by a four-day surge on the Wall Street and an overnight jump in commodity prices. However, the index could not sustain its early gain and nosedived in the afternoon session.

The benchmark index ended yesterday's trading at 13,552.06, advancing 182.61 points. Mainboard turnover amounted to HK$50.2 billion, higher than the HK$41.7 billion on Wednesday.

CASH Asset Management Associate Director Patrick Yiu said Hong Kong shares gave up their morning rally as the leap of A-shares started to narrow down.

"The aggressive rate cuts may imply the economic growth on the mainland is worse than expected," Yiu said, adding that the US economic figures recently announced were quite disappointing, which also stunned the performance of the benchmark index.

"The bad news has been more or less announced. It is time to see when the impact will show up," said Yiu, who expects the benchmark index to fluctuate between 12,000 and 14,500 in December.

Mainland property stocks closed with a remarkable surge yesterday, boosted by the 108-basis-point slash in interest rate announced by the central bank on Tuesday.

China Overseas Land Investment advanced 7.58 percent, or HK$0.69, to HK$9.79; while Guangzhou R&F Properties, the biggest developer in southern China, largely rose by 12.2 percent, or HK$0.45, to close at HK$4.14.

Redford Securities Head of Research Kenny Tang said the interest rate cuts can stimulate the property sales on the mainland, as the costs for property developers have been lowered.

"The rate cuts can especially benefit those property developers with high gearing ratio," Tang said.

Following the jump in the HSI, the China Enterprises Index of top locally listed mainland companies soared 2.7 percent to close at 7,120.83.

Mainland bank stocks gave up their early sharp gains, as market worries that the interest rate reduction may put further pressure on the net interest margins of locally listed mainland banks.

Top lender ICBC increased 1.6 percent, or HK$0.06, to HK$3.82, while its rival China Construction Bank rose 2.44 percent, or HK$0.1, to HK$4.2.

Mirroring the performance of the benchmark index, Europe's largest bank HSBC Holdings soared 0.8 percent, or HK$0.65, to close at HK$81.65.

China Mobile, another index heavyweight and the world's biggest phone carrier by market value, also ended yesterday's trading by leaping 1.39 percent, or HK$0.95, to HK$69.5.

(HK Edition 11/28/2008 page2)