Hong Kong shares powered ahead yesterday as interbank rates tumbled in the wake of Wednesday's surprise intervention in support of the yen, brokers said. The Hang Seng Index rose 511.62 points, or 6.39 per cent, to 8,515.97, taking its gains over the past two days to nearly 1,000 points. As bears scrambled to cover short positions and speculators hunted for bargains, the exchange saw its busiest day since March, with turnover rising to $10.35 billion. Santander Investment sales director Stuart Gregory said: 'There was a lot of short covering. People said, 'Oh God, things are improving, I'm going to get caught'.' Brokers said the market - which jumped in line with other markets in the region - would now look to Japan to deliver concrete reforms to revive its economy. Failure to do so could spark a sharp reversal, they said. 'We'll see if some of these financial reforms [in Japan] get put together and if they do, it's very bullish for the region,' Mr Gregory said. Group of Seven officials and representatives from Asian countries will meet this weekend to discuss the crisis. Yen weakness had sparked fears that China would devalue the yuan, driving Hong Kong shares to a three-year low on Monday. The bounce did not bring joy to everyone, with many bears painfully squeezed, traders and investors said. 'This surprise step-in caught everyone by surprise. A lot of people were short the yen, long the dollar . . . a lot of people have probably lost money,' SHK Asset Management director Vincent Koo Wing-pat said. Traders said the market remained in a defensive stance, with most investors in for the short term and many bears using yesterday's bounce as an opportunity to reduce positions. 'I have not fundamentally changed my view on the market,' Mr Koo said. 'Interest rates are still too high, liquidity's tight, the economy, there's no stability.' As the trading day wore on, the euphoria was clearly dying down. June index futures contracts had a stunning start, opening up 1,000 points, before easing to close 600 points ahead, albeit at a rare premium to cash. 'It was a chaotic day,' a trader said. '[It was] too risky to take out too many [arbitrage] positions.' The market moved up so quickly after the opening that the futures exchange ordered a rare intraday margin call of more than $1 billion. Margins are usually settled after the close of trade, with investors required to cover positions before they can trade the next day. Gains in mainland-related shares continued to lead, with the red-chip index surging 11.2 per cent to 992.81 points and the H-share index soaring 9.92 per cent to 475.11 points. Film distributor Golden Harvest bucked the trend, falling three cents to 49 cents despite signs of a bidding war for the company. Li Ka-shing, Rupert Murdoch and Robert Kuok have offered to buy 37.7 million new shares each at 50 cents a share, while 16 per cent stakeholder Village Roadshow has offered 70 cents a share to buy out shareholders.
