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HK shares up 1.9 pct; gold, oil gains spur commodities

Published 10/07/2009, 01:21 AM
Updated 10/07/2009, 01:24 AM

* Commodities gain on rise in gold, oil prices

* Banks up on view China may raise interest rates in Q1 2010

* Li & Fung rallies on U.S. economic outlook (Updates to midday)

By Jun Ebias

HONG KONG, Oct 7 (Reuters) - Hong Kong stocks were up 1.86 percent on Wednesday, as a surge in gold and oil prices spurred demand for resources shares, while the prospect that China may increase interest rates sooner than expected lifted banks. Gold eased but hovered near record highs as the dollar's weakness and inflation worries raised the bullion's appeal as a hedge. Oil prices surged on optimism that global demand was picking up.

"Generally, a lot of the moves we've seen in the past several days were related to the weakness in the U.S. dollar and this has boosted commodity H shares," said John Mar, co-head of sales trading, Daiwa Securities SMBC.

The benchmark Hang Seng Index rose 386.71 points to 21,198.24 at the midday break. Turnover was HK$36 billion ($4.6 billion), up from HK$30 billion on Tuesday.

Investors would probably continue to take cues from overseas markets until China markets resumed trading, analysts said.

"With China on holiday, there is actually not a lot of guidance in the Hong Kong market. It's moving a lot based on global markets. As long as global markets continue to be resilient, I think the market here will be resilient as well," Mar said.

Banks gained on expectations that China's central bank may raise interest rates by as early as the first quarter of 2010, following a similar move by Australia on Tuesday. Higher rates would lift interest margins, analysts said.

China Construction Bank advanced 2.55 percent, while Bank of China rose 2.41 percent.

"After the rate rise in Australia, the market is expecting other Asian central banks to follow soon, maybe starting from next year," said Yuk Kei Lee, analyst at Core Pacific-Yamaichi.

China may raise rates as early as the first quarter of 2010, Lee said. Previously, he had forecast Chinese policymakers to lift rates in the third quarter of next year.

Chinese gold miners extended gains as gold continued to strengthen. Zijin Mining Group rose 4.54 percent and Zhaojin Mining advanced 4.64 percent. Real Gold Mining climbed 5.36 percent.

Chinese oil producer PetroChina advanced 3.14 percent, lifted by rising oil prices.

The China Enterprises Index of top locally listed mainland Chinese companies was up 2.42 percent at 12,276.70, led by a 6.29 percent gain in China Shipping.

Consumer goods exporter Li & Fung gained for a second day on expectations of a rebound in the U.S. economy, one of Asia's top export markets, rising 6.64 percent.

Markets in China are closed for a public holiday. Trading will resume on Oct. 9. (Editing by Chris Lewis)

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