HONG KONG: Hong Kong shares posted their biggest one-day percentage gain in more than two months yesterday, bouncing back from one-week lows after gains on Wall Street boosted investor appetite for battered banking stocks.

Stocks rose as the city's first land auction of the year beat most estimates. Sun Hung Kai made the winning bid in the city's first land auction of the year, paying HK$3.37 billion for a site in Tseung Kwan O area yesterday.

The benchmark Hang Seng Index ended up 2.43 percent or 483.25 points at 20,377.27. Turnover was at HK$43.9 billion, hovering near one-month lows, versus Friday's HK$42.89 billion, suggesting that most investors were taking a wait-and-see attitude, worried about further monetary tightening measures from the mainland and the United States.

"People are still extremely cautious," said Alex Wong, director at Ample Finance Group, who explained that "they are not convinced that the market will move up sharply from here.

"Unless we see some clear direction, it's better to stay put, because in a thin market, movement can be quick," he said, noting that "people have to wait for more fundamental bullish reasons before they can act."

"I think it's going to be tough to challenge the 21,000 level," said Alfred Chan, chief dealer at Cheer Pearl Investments. "The direction is not clear-cut. People are uncertain about the strength of the US dollar, the Hong Kong dollar and liquidity in Hong Kong," he added.

Shares on the Hang Seng Index were priced at an average 13.2 times estimated earnings, down from 18.1 times on November 16 when the index closed at its highest level for 2009, according to Bloomberg data. Concerns over monetary tightening on the mainland dragged down the shares of the country's biggest lenders and have contributed to an 11 percent drop in the stock benchmark from its November high.

Sun Hung Kai added 2 percent to close at HK$102.10. Sino Land Ltd, one of Hong Kong's largest developers, climbed 2.3 percent to HK$13.30.

Banking heavyweight HSBC Holdings rose 3.2 percent. China's top lender Industrial and Commercial Bank of China (ICBC) rose 1.5 percent, while China Overseas Land gained 1.2 percent.

The China Enterprises Index of top locally listed mainland stocks closed up 2.27 percent to 11,519.56. Just two of the Hang Seng Index's 42 stocks dropped yesterday. The gauge's futures jumped 2.4 percent to 20,395.

China Daily/Agencies

(HK Edition 02/23/2010 page2)