'I believe there is upside in the next week or two,' said Marco Mak, head of research at Tai Fook Securities. 'One major reason is the stock market has been oversold and will catch up with the rally on Wall Street.'

Steven Leung, director of UOB Kay Hian (HK), said the rebound of the past two days also stemmed from a softening of the US dollar and improved overall market sentiment. However, he predicted strong resistance between the 14,700 and 14,800-point levels.

'The stock market will trade in a range with limited upside,' said Mr Leung, adding that the market was awaiting the overnight statement by the US Federal Reserve on the US economy and the threat of inflation.

Kenny Tang Sing-hing, an associate director at Tung Tai Securities, said: 'The Hang Seng Index can have more upside going forward but there might be a resistance level at 14,700. But the worst is over as the index has already reflected the interest rate hike and bird flu.'

Mr Tang believed the index could break through the 14,700-point level by the year end because of brokers' window-dressing and investors bargain hunting in the Christmas season.

The index fell to a three-month low of 14,215.83 points on Friday.

'In the past two weeks, the Hang Seng Index underperformed seriously,' said Mr Mak.

One possible reason for the poor performance last month could be the sell-off of big blue chips by futures traders hoping to make profits in the futures market, he said.

Yesterday's top gainer was China Merchants Holdings International, which closed up 5.65 per cent at $15.90, followed by Cosco Pacific, which finished 5.12 per cent up at $13.35. In third place was Cathay Pacific, which ended 4.12 per cent higher at $12.65.

'The top three performers are export-related stocks,' said Mr Tang.

Hong Kong and China's exports are expected to benefit from recent US economic data that turned out better than expected, explained Mr Tang. For example, US consumer spending rose 0.5 per cent in September, the US Commerce Department announced on Monday.

The fourth biggest gainer yesterday was New World Development, which closed 2.62 per cent up at $9.80. Early last month, the property giant announced it turned around to a net profit of $2.99 billion in the fiscal year to June from a loss of $976.2 million the previous year.

Blue chip Hutchison Whampoa gained 2.45 per cent at $75.20.

Of the 33 stocks on the Hang Seng Index, all but two rose yesterday. Citic Pacific was unchanged at $20.05 while the only stock to fall was Lenovo Group which dropped 7.24 per cent to $3.525.

The Chinese computer giant announced its interim results yesterday that showed turnover quadrupling to $48.107 billion in the six months to September and net profit rising 13.45 per cent to $711.16 million.

Despite the big growth in turnover, Lenovo's interim results fell at the low end of analysts' expectations, said Mr Tang.

Mainland stocks on the Hong Kong bourse also did well yesterday, with the Hang Seng China Enterprises Index rising 108.06 points to 4,878.43.

Additional reporting by Ken Lo