Hong Kong stocks rebounded yesterday, posting their biggest gain in more than a month, after Morgan Stanley upgraded its forecast for the Hang Seng Index and HSBC Holdings reaffirmed its positive outlook for Asian markets. Morgan Stanley raised its position on the blue-chip index to 'in-line' from 'cautious' and forecast that the market could reach 30,000 points by year-end. HSBC said Asian markets were still attractive despite the prospect of a US recession. 'As long as you are patient, you can still obtain a decent return this year,' said Garry Evans, HSBC's regional head of equity strategy for Asia-Pacific. After opening 1.04 per cent higher, the Hang Seng Index swung between gains and losses before closing 664.13 points or 2.72 per cent higher at 25,114.98. More than four stocks gained for every one that fell. Betting that the index could withstand recent turmoil, investors re-entered the market yesterday and took advantage of lower valuations following Wednesday's record sell-off, said Nancy Lee, an assistant director at Taifook Asset Management. 'People are starting to nibble into the market and this must be one of the good buying opportunities,' Ms Lee said. 'Trading momentum will come through at these levels.' Esprit Holdings was the biggest winner, surging 9.69 per cent to HK$95.10. Before yesterday's recovery, the global retailer's share price had plunged 25.26 per cent this year amid mounting concerns about slowing consumer demand in the United States. Hong Kong Exchanges and Clearing also recouped some of its losses, adding 4.36 per cent to HK$179.50. Investors would remain vigilant about any negative news from the US, and the Hong Kong market could find support between 24,000 and 25,000 points, said Ms Lee. Hong Kong paced revivals in regional markets yesterday that saw Indonesia jump 2.2 per cent, South Korea rise 1.09 per cent and Malaysia add 0.48 per cent. Bucking the trend, Shanghai slipped 2.63 per cent, extending losses for a third day as investors worried that the government's fight against inflation might come at the expense of economic growth. The People's Bank of China on Wednesday raised the reserve requirement for commercial banks to 15 per cent of deposits in a bid to manage credit growth. This marks the 11th such order by the central bank since last year. Beijing would continue to raise the reserve requirement to as high as 19 per cent by year-end and could curb loan growth in the banking sector to 14 per cent from 17 per cent, said Qu Hongbin, HSBC's chief economist for China. Despite concerns on the mainland, the H-share index surged 3.32 per cent to 14,481.41 points. China Life Insurance led gains among the Hong Kong-listed mainland companies, jumping 6.13 per cent to HK$35.50. But increases in the H-share index might be shortlived unless global market sentiment improved, said a Merrill Lynch research paper. 'Only an end to the global subprime crisis may bring any sustained recovery in the share price of Hong Kong-listed Chinese names,' said the report, whose authors include analyst David Cui. The H-share index might find support at 13,000 points, the report said after the market closed on Wednesday.