But, while brokers said the market had stabilised at current levels without much fear of a backward slide in the near term, they warned there was little to indicate an imminent rise in share prices and traders remained cautious.

The Hang Seng Index had a mixed start to the trading day, opening down 8.81 points at 13,763.14 and at one point falling to 13,736.18 before lunch.

The index gained strength in the afternoon session and closed at 13,881.71, up 109.76 points.

'Hong Kong investor sentiment remains cautious and it's still too early to say that we have a clear path towards a bull market,' said Louis Wong Wai-kit, head of research at Phillip Securities. He said it was a positive sign that the index was able to hold above the 100-day moving average mark at 13,736.

'But people are still waiting for earnings results from a number of blue chips, so I can't see a breakout from a trading range of between 13,950 and 13,750,' Mr Wong said.

Turnover totalled $20.73 billion, up nearly 24 per cent from $16.77 billion on Monday.

A Merrill Lynch report advised clients to shift some of their holdings from Thailand and the rest of Southeast Asia into mainland stocks.

'Liquidity and improving global growth prospects favour performance from North Asia, in particular China. Upgrade to overweight,' it said.

Shares in CNOOC, the mainland's largest producer of offshore oil, rose 15 cents to $4.525, while PetroChina, its biggest oil producer, rose 17.5 cents to $4.975. Sinopec gained five cents to $3.45.

Overall, H shares rose 86.48 points to 5,082.47.

BOCI sales director Jojo Choy said: 'Raw materials and commodities prices are strong. Since those companies dominate the H-share index, we will see continued good performance there.'

Mr Choy said oil shares continued to look attractive.

'Some of those shares have risen a lot. But we all know China needs more oil,' he said.

'There are worries that if oil stays around US$50 a barrel, we may see a negative impact on the economy. But if we factor in the weakness in the US dollar versus the euro, oil is really priced at US$30 to US$40 a barrel. That is not so scary.'

Property stocks also boosted the market, with the properties sub-index advancing 257.2 points to 16,816.03.

'Recently, property stocks have seen some correction, so good results announcements by the major counters should give their share prices some support,' KGI Asia director Ben Kwong Man-bun said.

Companies that reported earnings yesterday included Hysan Development, the biggest commercial landlord in Causeway Bay, and Kerry Properties, with both firms beating analysts' forecasts.

Hysan reported a 14 per cent jump in net profit for the year, prompting investors to push its stock up 35 cents to $16.55.

Kerry said its earnings rose sharply last year to a record $1.95 billion from $394 million. However, its shares slid 30 cents to $18.30.

Brokers said investors would continue to favour property stocks on expectations that other blue-chip property companies would follow with equally strong earnings.

Sun Hung Kai Properties gained $1.50 to $72.25, while Cheung Kong finished 75 cents higher at $70.75.

'There are worries about a potential interest rate hike in Hong Kong which may have an impact on property sales and corporate financing. But local interbank offered rates did steady yesterday, helping to alleviate some of those fears,' Mr Kwong said.

He said reports quoted the one-month Hibor at 1.73 per cent, compared with 1.75 per cent on Monday, suggesting capital outflows from Hong Kong had slowed and banks would be more willing to lend out their surplus funds.

Mr Choy said selling pressure in HSBC, which earlier this month posted its slowest profit growth in 2? years, had also been digested.

'I think people thought that HSBC at $128 a share was fairly valued, so when it dropped to around $126, people started buying again. That has helped to stabilise the market,' Mr Choy said.

HSBC rose 50 cents to $129 on improved volume of 18.5 million shares, up from 14.65 million on Monday.

Of the 33 shares in the Hang Seng Index, the only decliners yesterday were Johnson Electric and Swire Pacific.

Swire fell 50 cents to $63.75 a share, while Johnson Electric, one of the world's largest makers or micro-motors, fell 10 cents to $7.25.

Swire, a leading property developer and commercial landlord, is also the controlling shareholder in Cathay Pacific Airways, which will release its results for last year later today. Cathay finished unchanged at $13.95.