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SCMP Reporter

Hong Kong shares rebounded slightly yesterday, as a rising yen boosted index heavyweight HSBC and utility stocks.

 The Hang Seng Index finished 79.53 points higher at 6,859.48, following Tuesday's sell-off, which took the market to a five-year low.

 HSBC rose 1.29 per cent to $157, while the utilities sub-index climbed 3.23 per cent.

 Those gains were partly offset by continued pressure on developers and red-chips as fears of a yuan devaluation remained strong.

 ING Futures & Options institutional sales trader Kathleen Emerson said that the market continued to watch movements in the yen closely.

 'People took the current stability in the yen as an excuse to bargain hunt,' she said.

 The yen yesterday recovered to 145.9 to the US dollar in Tokyo trading from Tuesday's eight-year low of 147.64.

 Hints from two senior Japanese officials of intervention were behind the sharp gains, traders said.

 Rumours circulated that American financier George Soros was behind a US$1 billion short position in the Hong Kong-dollar forward market.

 A spokesman for Mr Soros in New York declined to comment on the financier's Hong Kong-dollar activities.

 Nikko Global Asset Management chief investment officer John Lai said it was not surprising to see something of a rebound after a 14 per cent fall in the index this month.

 'But the fundamentals are still very weak,' he said.

 A derivatives trader said the market's fall from the 9,000 level was due to selling from cash-strapped local investors and companies rather than foreign interests.

 Much of the forward interest in the Hong Kong dollar was from local companies hedging their exposure to the currency rather than speculation, he said.

 Merrill Lynch was seen to be a strong buyer in the futures market, which helped the August contract jump 135 points to 6,840, still a 19.48-point discount to the cash market.

 The New World group continued to suffer at the hands of speculation of a devaluation of the yuan.

 Shares in New World Development fell 5.84 per cent to $8.05.

 One broker said the risk premium incorporated in the group's valuation was now well past currency-risk alone.

 Utility stocks posted strong gains after Tuesday's sell off, blamed on redemptions. Hongkong Electric rose 5.33 per cent to $21.70, while Hong Kong and China Gas climbed 7.64 per cent to $8.45.

  Hedge funds were seen to take a back seat after taking on new shorts on Tuesday.

KEY FIGURES Close: 6,859.48 (+ 79.53) Turnover: $5.55 bln Volume: 2.97 bln shares Day's high: 6,891.54 Day's low: 6,708.18 Advanced: 183 Declined: 296 Unchanged: 492 August futures:  6,840 (+ 135) Sept futures:  6,860 (+ 125) 



Index tracks yen higher