Hong Kong shares continue its upswing yesterday. However, the rebound momentum lost its steam in the afternoon due to global banking giant HSBC's potential losses made by alleged fraud by Bernard L Madoff. AFP

Tracking the rebound of the US market last Friday, Hang Seng Index (HSI) yesterday rallied 1.96 percent to close at 15,046.95, even though the market outlook is clouded by the US fi nancial scandal.

The benchmark index yesterday soared 452 points to close at 15,211 in the afternoon break on speculation the US government will unveil new package to help the three largest automobile manufacturers, plus the central government unveiled new stimulus packages.

But the rally ran out of steam in the afternoon on fears that local lenders such as HSBC might fall victim to the fraud committed by the former Nasdaq Chairman Bernard L Madoff.

That brought down the index to end at 15,046.95, up 288 points. Daily transaction was about HK$42.6 billion.

Hang Seng Chinese Enterprise Index, which t racked the performances of mainland companies listed in Hong Kong, yesterday gained 1.18 percent to 8,005.21.

Conita Hung, head of research of Delta Asia Securities, said that market sentiment was mixed after the Madoff's incident and the newly-released economic measures from the central government.

"I believe that the HSI will be pretty volatile in the short run. Its short-term trend will hinge on the upcoming results of US companies such as Golden Sachs. It is expected to linger within the range between 14,480 and 15,800," she said.

Enlighten Securit ies and Futures Executive Director and Vice President Ricky Cheung was positive that the index can test the 17,000-mark this week. "The index has vaulted over 50-day average line in half a year.

It was a positive signal that the index will move toward the 100-day average of 17,400."

However, Cheung noted that the result of the US Fed regarding the rate cuts and the ongoing episode of Madoff's scam will bring uncertainties to the rally.

Although HSBC was reportedly suffering from an exposure to Madoff's fraud with a potential loss up to $1 billion, HSBC shares went up 2.37 percent to HK$84.2.

Another index mover China Mobile increased 3.15 percent to HK$81.

Shares of mainland property stock had mixed performance yesterday.

R&F Properties dropped 2.03 percent to HK$6.75, while China Overseas Land and Country Garden increased 2.7 percent and 1.19 percent, closed at HK$10.62 and HK$1.7, respectively.

(HK Edition 12/16/2008 page3)