The Hang Seng Index closed up 120.05 points at 14,087.87, off a high of 14,093.43 and a low of 13,898.92. Turnover was 17.17 billion Hong Kong dollars (2.2 billion US dollars).
The Hang Seng China Enterprises Index was up 14.83 points or 0.30 percent at 4,923.54.
To said a significant drop in the number of homeowners with negative equity also helped improve market sentiment.
Hong Kong Monetary Authority chief executive Joseph Yam said Thursday that the number of mortgages in negative equity - where the outstanding loan amount exceeds the value of the property - fell to 19,200 at end-December from a peak of 106,000 in June 2003. Expectations of a good response to a government auction of a hotel development site next Tuesday also helped boost interest in the property sector. "There were very little sell orders from institutional investors in the afternoon probably because they want to boost the market before unloading their positions," To said.
The property sub-index closed up 238.53 points or 1.40 percent at 17,324.73.
Sun Hung Kai Properties was up 1.00 Hong Kong dollar at 73.25 Hong Kong dollars, Cheung Kong up 1.50 at 74.75, Sino Land up 0.20 at 7.20, New World Development up 0.20 at 8.05 and Wharf Holdings up 0.05 at 25.60.
Among financials, HSBC gained 0.50 to 133.50, unit Hang Seng Bank was up 1.00 at 106.50, Bank of East Asia up 0.20 at 23.70 and BOC Hong Kong up 0.05 at 14.70.
China-related stocks were mixed, with PetroChina down 0.025 at 4.625, Chalco up 0.025 at 4.775, China Power down 0.05 at 2.925, Angang New Steel up 0.125 at 4.475 and CNOOC up 0.05 at 4.275.
Lenovo Group was unchanged at 2.175, while Wheelock Co was also flat at 11.90.
China Netcom Group Corp (Hong Kong) was flat at 11.35, while Semiconductor Manufacturing International Corp (SMIC) fell 0.03 at 1.70.
A regional brokerage house said in a research report that Lenovo and Wheelock may be dropped from the list of 33 stocks which make up the Hang Seng Index (HSI), while Netcom and SMIC may be included.