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SCMP Reporter

BANKING and construction stocks were among the big gainers as smiling faces returned to the Hong Kong market yesterday following Monday's 262-point dive.

  Monday's wild selling spree continued as the market opened yesterday, sending the blue-chip Hang Seng Index plummeting another 90 points during early trading, but the market quickly bounced back.

  As confidence returned, the index climbed to close up 112.44 points on the day at 9,125.21 points.

  The dramatic turn-around was mounted as news came of the apparent willingness of the Japanese Government to try to halt the Tokyo market melt-down.

  An announcement to confirm that the 28th round of Sino-British Joint Liaison Group (JLG) talks will go ahead as planned next week in London also fuelled confidence.

  Although the JLG talks had been planned, yesterday's announcement in Hong Kong was seen as a message that at least Britain and China are still talking.

  The market tumbled 262 points on Monday on fears that the Government might decide to introduce Governor Chris Patten's controversial political package for legislation at a key Executive Council meeting this morning, bringing about a collapse in politicalreform talks with China.

  Investors are now awaiting Mr Patten's address to the Legislative Council tomorrow to discover whether Exco has given the Governor its blessing to risk China's wrath and push ahead with the first part of his political reform Bill without Beijing's backing.

  A dramatic morning for Hang Seng index stocks was followed by a sleepy afternoon as investors' attention swung to the futures market where Barings was seen to leading a buying spree.

  December futures rebounded, closing up 330 points at 9,200 points on a high turnover of 14,584 contracts.

  Shares continued to hover near the 9,100 level for most the afternoon before the close after rebounding on a jump in index futures and a lack of fresh selling.

  Turnover of stocks was relatively light at $4.54 billion compared with Monday's final volume of $5.58 billion.

  Shanghai Growth Investment and its warrants were traded quietly on their first day of listing.

   Vickers Ballas director Barry Yates said despite the rebound there was continuing unease over the threat of a looming constitutional crisis.

  He thought the market had over-reacted yesterday to confirmation of next week's JLG talks, which had hardly been in doubt.

  Uncertainty still appears to be rife. Nial Gooding, assistant director at Barclays de Zoete Wedd, said: ''Most investors are willing to be led at the moment.

  ''If they can find an excuse to sell they will do. Likewise, if they find an excuse to buy they will do that also.''   Bank of East Asia topped the most-actives list by gaining $1.75 to $44 on a turnover of $216.7 million.

  It was followed by Hutchison, which closed unchanged at $31 on a turnover of $171.9 million and HSBC Holdings, which jumped $1 to $85.50 on a turnover of $164.3 million.

  The banking sector traditionally enjoys an end-of-year rally in Hong Kong, but Bank of East Asia performed particularly well on rumours that a special bonus issue or dividend may soon be forthcoming.

  Cathay Pacific Airways bounced back after being one of the big losers in the dive on Monday due to investor concerns over losing market share to newcomer Virgin Atlantic on its lucrative London route.

  Second-liners such as Emperor (China) and Giordano Holdings also found their way to the top of the most-actives list amid the quieter trading, with the former soaring $1.275 to $5.80 and the latter advancing 32.5 cents to $4.175.

  Chris Tong, a dealing director at DMT Securities, attributed Emperor's surge to a shortage in share supply plus the fact that it had lagged the market in recent days.

  As a whole, second-liners also faired well, especially those involved in the construction industry.

    Samuel Lau Kwok-Leung, research director at Seapower Securities, said there was strong expectation of more mainland construction orders being won by Hong Kong companies following the relaxation of China's austerity programme, coupled with confidence about the prospects of the Hong Kong property market.

  Companion Building rose 7.5 cents to close at $3.95, CIL Holdings climbed 7.5 cents to end the day at $2.625, and Siu-Fung Holdings jumped 10 cents to close at $3.35.

  China Everbright International and Hanwah Holdings and its warrants were suspended all day yesterday, while Singamas Container Holdings was suspended for the afternoon.



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Hang Seng Index

Banks among big gainers