Surging mainland-related and utility stocks kept the market ahead yesterday even as index heavyweight HSBC dropped to its lowest level in two years. The Hang Seng Index ended 71.61 points, or 0.93 per cent, higher at 7,733.47, buoyed by persistent talk that Beijing would reduce interest rates, brokers said. Wall Street's gains on Monday also supported sentiment, they said. HSBC, however, which makes up about a quarter of the index's weighting, fell $3.50 to $147, its lowest close since October 8, 1996. Brokers said the counter was coming under pressure as deterioration in non-Asian markets, especially Latin America, was seen affecting its operations. Meanwhile, HSBC's valuations relative to international banking stocks were less competitive after fallouts in the sector on Wall Street in the past few weeks. 'There is concern both on the fundamental and the valuation side,' said G.K. Goh banking analyst Leo Wah Chee-hang. Operations in Brazil contributed US$142 million, or 4 per cent of HSBC's pre-tax net profit in the first half of this year, he said. Another broker pointed out that the market was less concerned with lost income in places such as Brazil as much as potential provisions if that country buckled under its immense foreign debt holdings. A 4.66 per cent increase in China Telecom to $12.35 and 4.34 per cent jump in CLP to $36 helped offset the losses in HSBC. The blue-chip index remains more than 1,000 points above the pre-intervention level of 6,660.42 even as HSBC is $4 below its pre-intervention price of $151 on August 13. Broker said this reflected a fundamental reweighting of the index in the wake of the Government's heavy buying spree. Some of the most bombed-out blue chips remained firm following the intervention, they said, pointing to Great Eagle, Wharf, Wheelock, Bank of East Asia and Hopewell, all of which have advanced more than 30 per cent since the intervention began on August 14. Mainland-related counters and Hang Seng Index members Guangdong Investment, China Resources Enterprise and Shanghai Industrial have risen more than 40 per cent over the same period. Yesterday, H shares rose 5.99 per cent and red chips added 2.79 per cent, raising the gains for the past two days to 11.46 per cent for H shares and 8.1 per cent for red chips. 'I think it's more a valuation story than significant changes in fundamentals . . . these stocks were oversold,' said Merrill Lynch H-share analyst Jin Qiu. Brokers said they also saw signs of speculation in the China shares. 'There's been some good news, and stories of 'hot money' from China [buying into equities],' said Nelson Wong, the sales director of Celestial Asia Securities. 'And then with [the mainland] National Day coming up [on October 1] . . . people will create any excuse.'