Hong Kong stocks closed firmer yesterday as investors remain cautious ahead of this week's meeting on United States interest rates. The Hang Seng Index rose 55.78 points to settle at 13,840.29. Brokers said the turnover of $6.65 billion was relatively low as investors awaited news of the US Federal Open Market Committee's meeting today to set short-term interest rates. Brokers said the market expected an increase of 25 basis points. Second-tier property companies rose ahead of the Government's land auction today. Amoy Properties gained 4.13 per cent to close at $7.55 and Great Eagle rose 2.11 per cent to $14.50. The market was also supported by futures activity, with the June contract expiring today. Downward pressure came from HSBC, which fell $3 to $289, after its proposed takeover of American bank Republic New York Corp was challenged by a pressure group claiming HSBC's US operations had a poor lending record to minorities. There were also further concerns over HSBC's extended negotiations with the South Korean Government to take a 70 per cent stake in Seoulbank, brokers said. China plays continued to dominate the market, spurred on by more gains in the mainland exchanges which saw markets in Shanghai rise to a new record high. The red-chip index gained 3.58 per cent to close at 1,187.43 points and the H-share index rose 3.47 per cent to 578.15 points. 'H shares and red chips outshone the market,' said Celestial Asia Securities research director Eugene Law Ka-kin. Oil company Sinopec Kantons, which started trading last Friday, had a strong day, rising 15.74 per cent to $1.25, as analysts were optimistic that the momentum in China stocks would continue. 'I think we will continue to have a lot of good news from China,' said APC Investment Management Services fund manager Kitty Chan. Mid-cap stocks also performed well, with securities company First Shanghai Investments soaring 39.21 per cent to 71 cents amid rumours that China Everbright was seeking to take over the firm (Stock Split, Page 12). Shenyin Wanguo, whose parent group has a 10 per cent stake in First Shanghai, also rallied, by 16.81 per cent to $1.32. Blue chips are expected to trade within the present range until after the announcement on US interest rates and further news on the state of negotiations over the proposed Disney theme park in Hong Kong. 'The market atmosphere appears to be positive on blue chips but people are not really 100 per cent sure - there is an element of hesitation,' Mr Law said.