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Liquidity bounce for HK shares

HONG Kong shares scaled new multi-month peaks in a liquidity bounce yesterday.

The benchmark Hang Seng Index closed up 1.4 percent at 20,251.62, with shares worth HK$80.9 billion (US$10.4 billion) changing hands compared with Friday's HK$83.6 billion.

The index rose to 20,385.69 earlier in the session, its highest level since September 9 last year.

China Mobile led with a 4.2-percent jump to HK$80.35. The stocks, which have climbed a mere 3 percent this year against the blue chip index's 41-percent advance, are expected to find favor with investors as the sharp rally in the region tapers off.

The index is expected to meet resistance at 20,500 points, while some of its gains may be wiped off after index futures expire tomorrow.

Property stocks surged, with home sales and prices continuing to climb as demand picks up pace in the low interest rate environment and while supply remains tight. Top developer Sun Hung Kai Properties rose 3.4 percent while conglomerate New World Development advanced 3.6 percent.

"Hong Kong's main difference from any other property market in the world is its very low supply.

"This sets the base for a very strong rebound as the economy recovers and liquidity seeps back into the system," said UBS analyst Eric Wong.

UBS raised its property price forecasts across the board, estimating a 32-percent increase in home prices between June 2009 and December 2010.

The China Enterprises Index, which represents top locally listed mainland stocks, was up 1.7 percent at 12,189.62.

China Shenhua Energy extended Friday's gains to advance 3.9 percent following strong power output data last week, which bodes well for coal demand.

Power plant equipment maker Harbin Power rose 9 percent, while Shanghai Electric jumped 7.8 percent.


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