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Energy Shares Lead Gains In Hong Kong

HONG Kong shares rose yesterday, with energy stocks leading gains as crude oil hit a seven-month high, while electricity producers shot up after agreeing to a nominal increase in coal contract prices in two Chinese mainland provinces.

Aluminum Corp of China dropped 2.1 percent after Rio Tinto scrapped its proposed US$19.5 billion tie-up with the Chinese company's parent Chinalco.

"Investment sentiment could be negatively affected. In the past, the Rio-Chinalco deal has been one of the key positives for sentiment and a major concern for short-sellers," Citigroup analysts Catherine Wang and Thomas Wrigglesworth said in a note to investors.

Huadian Power rose 12 percent to HK$2.43 on reports coal miners and power producers had agreed to a 4-percent increase in contract coal prices in Shandong and Henan provinces after protracted negotiations.

Datang International Power advanced 7.2 percent, while China Resources Power Holdings, which was trading lower after announcing a HK$6.05-billion (US$775.9 million) rights issue, recovered to close up 3.8 percent.

The benchmark Hang Seng Index was up 1 percent or 176.76 points at 18,679.53, shrugging off a 2-percent drop in heavyweight HSBC.

"With the economy still a while away from a complete recovery, stocks are looking quite overbought now," said Castor Pang, strategist with Sun Hung Kai Financial. "But funds flooding the market don't seem to be paying any attention to valuations. This is very similar to a pattern we see in the mainland markets," he said.


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