However, some analysts said the recovery was not well-founded.

'The rebound was overdone and the market has not yet bottomed,' said Castor Pang, a strategist at Sun Hung Kai Financial.

'[The] turnover was not enough to match such wild gains. Those who had previously sold Hong Kong stocks will not return to buy stocks unless they fall deeper.'

The strong surge led to HK$56.14 billion in turnover, barely above last Friday's HK$56.13 billion amid a rally in the market.

Underscoring the fact that many investors remained sidelined, Champlus Asset Management investment director Ricky Tam Siu-hing said the rebound was driven partly by bulk buying from warrant issuers to hedge the risk of their outstanding short-lived contracts.

While most of the blue chips surged, China Mobile and Hong Kong banking and property stocks combined for more than half of the gains in the key index, rising along with other Asian stock markets inspired by the US rally, analysts said.

'The gains in the US market on Friday led the rally of Asian stocks, including Hong Kong,' said Patrick Yiu Ho-yin, an associate director at Cash Asset Management. 'The US stocks will keep doing well given the rosy economic and corporate earnings outlooks there.'

In New York, the Dow Jones Industrial Average rose 0.3 per cent on Friday to a new closing high after the US Department of Commerce released stronger than expected retail sales figures for last month. Sales rose 0.9 per cent, the most since July last year.

China Mobile gained 3.64 per cent, contributing almost one-third of the index gains, while Bank of East Asia rose 5.49 per cent and BOC Hong Kong climbed 6.7 per cent. Cheung Kong (Holdings) added 3.26 per cent and Sun Hung Kai Properties rose 3.52 per cent.

The H-share index jumped 3.07 per cent to 9,972.05 points, spurred by strong gains in the mainland stock markets. Leading the way, China Life Insurance rose 5.2 per cent, while China Construction Bank Corp gained 3.6 per cent and Bank of Communications leaped 4.65 per cent.

The Shanghai A-Share Index soared 4.73 per cent to 2,935.539 points while the Shenzhen A-Share Index climbed 5.25 per cent to end at 652.21 points.

'The 10 per cent correction in H-share prices [over the past two weeks] did not alter investment preferences - foreign investors have instead taken this as a buying opportunity,' Citigroup said in a research report. 'As a result, inflows to China country funds rose 48 per cent week on week to a nine-month high of US$578 million in the week to January 10.'

Citigroup added that inflows to Greater China funds, albeit slowing, continued for the 17th week, while Hong Kong country funds faced their first redemption in three months.