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Blue chips ride strong surge in commodities

Nick Westra

The Hong Kong stock market rose to its highest in more than three weeks yesterday, as investors shrugged off concerns about a slowing global economy and chased commodity shares benefiting from record raw material prices.

Oil and gold prices hit new highs and the cost of other metals and foodstuffs also picked up as investors stocked up on the commodities to hedge against rising inflation and a weakening US dollar.

Eager to cash in on the rising prices, investors turned to the companies dealing with the basic goods.

'We see a lot of resilience in the commodity area,' said Tim Leung, a fund manager at IG Investment. 'It probably will be another reason to draw some funds in that direction.'

Energy stocks rallied after crude oil futures closed in New York on Tuesday at the highest level since trading started in 1983.

PetroChina, the mainland's largest oil producer, surged 3.28 per cent to HK$11.96 and CNOOC, the nation's largest offshore oil producer, advanced 3.21 per cent to HK$13.50.

The Hang Seng Index gained the most in almost two weeks, rising 769.09 points or 3.24 per cent to 24,483.84.

Hong Kong paced a regional rally that saw Taiwan gain 1.86 per cent and Japan 1.49 per cent.

The Shanghai Composite Index rose the most since February 4, climbing 2.26 per cent to 4,334.047 points.

Mainland financial firms received a strong boost after JP Morgan and Credit Suisse upgraded their outlook on the lenders, saying earnings this year would be better than expected.

'We believe the market understated the earnings outlook for H-share banks,' said JP Morgan analysts Samuel Chen and Sunil Garg in a report released yesterday.

China Construction Bank Corp, the nation's second-largest, jumped 6.05 per cent to HK$5.96 while Industrial and Commercial Bank of China, the largest, closed 3.44 per cent higher at HK$5.41.

The good news in the market may have given investors the direction they were seeking, as turnover picked up to HK$99.35 billion, coming within a whisker of the key HK$100 billion mark that has eluded the stock exchange for 15 consecutive trading days.

'After you feel bad for so long, you want good things to happen and so the market turned around,' said Francis Lun Sheung-nim, a general manager at Fulbright Securities.

Hong Kong Exchanges and Clearing, the stock exchange operator, rose 6.87 per cent to HK$152.50.

Property companies rallied after Financial Secretary John Tsang Chun-wah disclosed that some portions of Hong Kong's record budget surplus would be allotted to providing tax breaks on property rentals and investments.

Cheung Kong (Holdings), the second-largest Hong Kong developer, climbed 3.5 per cent to HK$118.40.

Despite yesterday's stock surge, dark clouds may still be on the horizon, as consumer confidence in the United States plummeted to its lowest in five years, according to the New York-based Conference Board.

US consumer spending was depressed by crashes in the housing and credit markets, signalling that the world's largest economy was on fragile ground, said Stephen Roach, the chairman of Morgan Stanley Asia, at a presentation in Hong Kong. 'With a consumer-led pullback, it's possible but highly unlikely that the US will avoid a recession,' he said.

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