Hong Kong stocks were already destined for strong gains yesterday - before news broke that Washington and Beijing had reached agreement on World Trade Organisation admission - with Hutchison Whampoa and associate Cheung Kong again in the driver's seat. The double dose of good news took the Hang Seng Index 372.55 points, or 2.62 per cent, higher to 14,562.22 after reaching an intraday high of 14,634.99. The index was given a substantial boost by news in the afternoon of an agreement that paves the way for Beijing's entry into the WTO, with the upside led by blue chip China Telecom. Earlier, Hutchison said it was to announce a joint venture with United States-listed telecommunications firm Global Crossing. Details of the US$1.2 billion joint venture were announced after the market closed. Hutchison rose 5.02 per cent to its highest ever close of HK$88.75, with Cheung Kong gaining 6.9 per cent to $81.25 (Stock Split, Page 12). The Global Crossing partnership will link Hutchison's fixed-line fibre optic network in Hong Kong with Global Crossing's international undersea network. The news came hot on the heels of reports British-based Vodafone AirTouch had launched a takeover bid for Mannesmann, in which Hutchison recently took nearly 10 per cent as part of the Orange deal. 'I think it has come back to telecoms. Finally Hong Kong is catching on to these US valuations,' Sun Hung Kai Securities research head Gilbert Chu Kwok-tsu said. 'Across the board, they [stocks] moved higher but I think the momentum is not as strong as it is in the telecoms.' China Telecom soared 8.56 per cent to $35.50 and saw the fourth-largest turnover - $864.85 million. Hutchison came in second on the active trading list, with turnover of $1.11 billion and the Tracker Fund was third at $1.05 billion. HSBC topped the turnover list with $1.17 billion of shares traded. The counter finished 1.55 per cent firmer at $98. ABN Amro Asia sales trading director MaryBeth McNamara said HSBC, Hutchison, China Telecom and Cheung Kong accounted for 352 points of the index's 375.12-point gain. 'It was these four stocks pulling it up,' Ms McNamara said. 'We've raised our target price to $40 for China Telecom.' Another dealer said: 'China Telecom is [on the back of] WTO, but at the same time, it's still very much undervalued.' Cable & Wireless HKT slumped, finishing 3.12 per cent lower at $20.15 despite announcing that it had agreed to a one-stop billing deal with Guangdong Posts and Telecommunications. Analysts said the counter had had a good run recently, particularly on the news of an Internet multimedia alliance with Star TV. They also said the Hutchison agreement with Global Crossing gave the Li Ka-shing company a competitive edge. A trader said: 'I think that one of the reasons is that [HKT] has had a good go recently, plus this Global Crossing deal has come out. 'So if you've got a new fixed-line deal going on, there's a possibility that [people are] selling their HKT and getting into [Hutchison].' Ms McNamara said the Global Crossing deal made Hutchison a 'significant challenger to HKT'. Brokers said Wall Street's rally last Friday muted concerns over a potential interest rate increase when the US Federal Reserve met today. Mr Chu said: 'My view is that we're going into the middle of November and it will be very difficult for them to tighten liquidity ahead of Y2K.' Select red chips and H shares soared by up to a third in value. The red-chip index soared 9.64 per cent, while the H-share index jumped 9.58 per cent. Red chip Chu Kong Shipping rose 15.78 per cent to 88 cents, while Legend gained 15.11 per cent to $13.90. South China Research analyst Kenneth Lau Pui-man said: 'I think there is a little bit more upside for the red chips, as basically they have underperformed the broader market.' The mainland markets did not react in a similar fashion, with only Shenzhen's B shares rising substantially.
