Hong Kong stocks logged impressive gains yesterday as investors speculated on the benefits that local companies may reap from an expected Federal Reserve interest-rate cut. Interest-rate futures markets were predicting a 25 basis point cut in US borrowing costs later yesterday. Hong Kong's interest rates typically move in line with US rates because of the peg to the US dollar. BOC Hong Kong (Holdings) was the biggest gainer among financial shares on hopes that a rate cut will boost their lending business. It rose 2.75 per cent to close at HK$22.40. Hang Seng Bank added 2.11 per cent to HK$164.90 while HSBC Holdings leapt 2.17 per cent to HK$136.70. Property plays also benefited from speculation of lower interest rates. Sino Land rose 7.29 per cent to HK$27.95. Henderson Land Development was the second strongest, firming 7.04 per cent to HK$76. Sun Hung Kai Properties put on 6.77 per cent to close at HK$165.50. The Hang Seng Index climbed 2.55 per cent to close at 29,226.84 points. The H-share index added 1.81 per cent to 17,497.77 points. 'A rate cut widens the spread between Asian currencies and the dollar, implying some money flowing into the region,' said Bill Belchere, the chief economist for Asia at Macquarie Securities. Buying interest in banks also resumed on Monday's news that Singapore and Middle Eastern investors are pouring billions of dollars into Swiss bank UBS to bail it out of its subprime trouble. 'This helps get us closer to the bottom of this. Markets don't like uncertainty, they like transparency,' Mr Belchere said. Felix Man Kam-fai, a director of Hantec Futures, said the Bush administration's promise to step in to help subprime borrowers bolstered investor confidence. 'People are thinking the crisis may be solved over time and this helped improve the performance of bank and property stocks,' he said. Yesterday, all of Asia's key stock markets strengthened. Shanghai edged up 0.25 per cent, Tokyo rose 0.76 per cent and Singapore jumped 1.01 per cent. 'A rate cut would be good for Asia and give central banks in the region room to apply some countercyclical policies - if there's a need - early in the new year,' Mr Belchere said. Some traders say the gains are likely to be limited this month as business slows down for the holidays. 'It is hard [for the Hang Seng Index] to exceed 30,000 as there is nothing new and exciting that can stimulate investment,' except for the US rate cut, said Peter Pat Ngan, a vice-president at BOCI Research. Global Green Tech Group shares dived 20.54 per cent to HK$1.47 after the company shelved the HK$2.41 billion spin-off of Bio Beauty Group.
