Hong Kong financial stocks continued to rally yesterday as investors hoped an expected easing of accounting rules would help banks and other industry players report higher earnings for the first quarter. Standard Chartered, which has recouped more than 50 per cent of its value since last month, rose a further 7.9 per cent to HK$113.30. Manulife, the Canadian insurance giant, climbed 4.9 per cent to close at HK$99.55. However, mainland lenders ended lower as investors cashed in their gains from Thursday. State-owned Bank of China lost 1.87 per cent to HK$2.62, Industrial and Commercial Bank of China declined 0.97 per cent to HK$4.06 and China Construction Bank Corp fell 1.09 per cent to HK$4.54. Analysts expect Hong Kong banks to benefit more from the new measure than mainland counterparts because of their higher exposure to overseas debt securities. The new measure will allow financial institutions in the United States to use 'significant' judgment when valuing debt securities, including asset-backed instruments that led banks to set aside massive provisions last year. Existing US accounting treatment required firms to strictly value their securities against the market value even in an inactive or illiquid market. 'We believe Hong Kong and many other countries will follow such a change in accounting policy,' said DBS Vickers analyst Jasmine Lai in a research report. 'This news should continue to provide support to banking stocks in the short term.' The brokerage upgraded Dah Sing Bank Group and BOC Hong Kong (Holdings) to 'buy' from 'hold', saying they would be the key beneficiaries of the rule change. Dah Sing closed up 9.64 per cent to HK$5.12 while BOCHK advanced 3.9 per cent to HK$9.33. Samuel Chen, an analyst at JP Morgan, expects some banks to recover provisions made for overseas toxic assets and loans last year if similar changes are introduced to Hong Kong accounting rules. But the write-backs will not significantly improve their bottom lines given the relatively low subprime assets and derivative exposures. Paul Winkelmann, the chairman of the Hong Kong Institute of Certified Public Accountants (HKICPA), said almost all Hong Kong-listed firms followed the international accounting standards and amendments made in US accounting rules would not immediately affect their profits. 'The measure was brought in quickly in the US and we need to wait and see the impact on banks.'