Shares of Dao Heng Bank and parent company Guoco Group soared on news of the lender's sale to Singapore's DBS Group in a transaction that could be worth up to S$10 billion (about HK$43.18 billion).
Dao Heng Bank rose 51.6 per cent to HK$57, while Guoco increased 40.36 per cent to HK$38.60.
Dao Heng's rise accounted for most of the gain in the Hang Seng Index, which closed up 2.22 per cent to finish at 12,989.47 points.
In Singapore, DBS shares fell 9.8 per cent to S$13.80, as analysts said the transaction - at more than three times Dao Heng's book value - was expensive.
But they said the deal was necessary if DBS was to have a substantial presence in Hong Kong in its bid to become a pan-Asian bank.
'It is something DBS had to do,' Lehman Brothers banking analyst Grant Chan said.
UBS Warburg's Singapore banking analyst Jaj Singh said the strategic value of the deal for DBS would become apparent in the medium term.