Hong Kong stocks edged higher yesterday amid more favourable sentiment from overseas markets, but fell back from earlier highs after disappointing results from Bank of East Asia. With an interim net profit at the lower end of expectations, Bank of East Asia caused some concern that the economic recovery may not be as strong as initially believed, said Herbert Lau, head of research at Celestial Asia Securities. 'The market felt a bit let down,' he said. Bank of East Asia's shares came under heavy selling pressure and finished the day 3.07 per cent lower at $22.10 after being 0.87 per cent higher before the earnings were released. Trading volumes in the counter were about five times greater than the recent average and the fact that some selling orders were quite large suggested that institutional investors were among those cutting their exposure, traders said. Other banking stocks gave up some of the earlier gains, but most still ended higher, suggesting that investors are holding out for better numbers from HSBC Holdings and Hang Seng Bank, which report on Monday. Hang Seng Bank closed 0.76 per cent higher at $99.75 and BOC (Hong Kong) added 1.91 per cent to $13.35, while HSBC finished flat at $115. The Hang Seng Index gained 0.45 per cent, or 54.93 points, to 12,238.03, after falling back from an intraday high of 12,344.96. The index dropped 0.93 per cent on the week. Property stocks also continued to give up some of their recent gains amid growing expectations that Hong Kong banks may start to raise rates in line with the US as early as next month. The sector index dropped 0.28 per cent yesterday and underperformed the Hang Seng Index on the week with a 1.58 per cent decline. 'The market does not have a direction right now. Most people are still waiting to see how the interest rate goes and how China's macro-tightening measures are impacting the economy,' said Steven Leung Wai-yuen, director at UOB Kay Hian Hong Kong. Worries over interest-rate rises in both the US and Hong Kong would continue to cloud the Hong Kong stock market, he said, and until those concerns were cleared, the stock market would continue trading in a narrow range of 12,000 to 12,500 points. China-related shares booked slightly larger gains but also retreated from their highs despite the fact that they would not be directly affected by a slight slowdown in the Hong Kong recovery. The H-share index added 0.73 per cent, or 31.22 points, to finish at 4,335.343 and cut the week's losses to a modest 0.31 per cent. Oil producers contributed strongly to the index gains as crude oil futures prices remained above US$42 during Asian trading hours. PetroChina rose 0.65 per cent to $3.875 and China Petroleum & Chemical Corp (Sinopec) added 0.83 per cent to $3.05. Blue-chip CNOOC was up 2.74 per cent at $3.75. Kingston Lee, head of Hong Kong and China research at ING Financial Markets, said because of the strong growth in tourists and individual traveller numbers from the mainland, retail stocks were the market's current darlings. 'Retail stocks are doing quite well. They will continue to be the market favourites for the coming few months. I think this trend can last till early next year,' Mr Lee said. The hunt for promising investments has now moved through to the smaller stocks in the sector and yesterday's star performer was clothes retailer and manufacturer Theme, which jumped 37.5 per cent to 5.5 cents.