The local market finished sharply higher yesterday as investors jumped back into stocks with a stronger appetite for risks.

An overnight rally on the Wall Street, successive rebounds in the Shanghai Composite Index and the well-received 2008-09 budget unveiled by Financial Secretary John Tsang all all helped boost investor confidence.

Hovering markedly above the break-even point for the entire session, the Hang Seng Index (HSI) eventually closed with a 769-point (3.2 percent) gain at 24,484, its highest close since before the lunar new year holiday.

HSBC Holdings, China Mobile, HKEx and mainland financial and oil majors jointly provided momentum to the blue-chips index, whereas only four HSI constituents were left in the cold.

Defensive play CLP Holdings was among the losers, though the stock remains the best-performing blue chip year-to-date.

We foresee the local electricity supplier reporting a 10 percent year-on-year growth in earnings in the 2007-08 fiscal year, totaling HK$10.9 billion, when it announces its final results today.

Led by the run-up in China Life amid signs of a stabilized mainland market, the Hang Seng China Enterprise Index (HSCEI) soared 610 points (4.6 percent) to end at a one-week closing high of 13,937. Zhejiang Expressway was the only HSCEI constituent that missed out on the broad-based rally, while basic materials, financial, gold and shipping stocks appeared strongest, sector-wise.

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Technically, drastic momentum buying, coupled with an increased turnover, should bode well in the near term momentum, but it remains to be seen whether the local market will break out from the prevailing range-trading pattern.

US Federal Reserve Chairman Ben Bernanke's semi-annual testimony to the US Congress could be one event that acts as impetus for a breakthrough on the upside.

On the flip side, the market seemed to have temporarily set aside worries of a stagflation in the US, after recent reports showed increased inflationary pressure on the upstream, weakened consumer confidence and a housing market in trouble. As such, investors should look out for possible anti-climax selling.

Taifook Research provided the article.

(HK Edition 02/28/2008 page3)