The most actively traded stock, up 4.05 percent to HK$6.42, its highest close in a week. ICBC gained 3.07 percent to HK$6.05. "Chinese banks had been seriously oversold and bargain-hunting led to a strong rebound in stocks such as CCB," said Alex Wong, a director at Ample Finance Group. "The market found good support at 21,300, with the upside likely around 21,800 in the short run."
The benchmark Hang Seng Index ended up 1.02 percent or 217.97 points at 21,677.98, its biggest single-day percentage gain in nearly two weeks. The China Enterprises Index of top locally listed mainland Chinese stocks was up 2.53 percent at 12,600.76. Market turnover increased to HK$73.46 billion ($9.5 billion) from Monday's HK$69.04 billion.
Hopes for more mergers and acquisitions fuelled demand for energy sector stocks, lifting China Oil & Gas to an intraday high of HK$1.51, its highest since July 2007. It ended up 7.86 percent at HK$1.51. Chinese natural gas distributor China Gas planned a general offer for integrated gas operator Zhongyu Gas, sources close to the deal said.
Aluminium Corp of China Ltd (Chalco), the world's most valuable aluminium maker, fell 4.8 percent intraday to HK$9.21, its lowest in two weeks, after warning it would post a loss for 2009. The stock ended at HK$9.65, down 0.21 percent. Contract cell phone maker Foxconn ended down 6 percent a day after reaching a 20-month high, as investors locked in gains and questioned the stock's steep valuation.
Xiwang Sugar, one of the top percentage losers in Hong Kong, fell to a more than two-week low of HK$2.52 before ending at HK$2.68, down 9.2 percent. It said it would sell 120 million shares to its controlling shareholder at HK$2.51 each. China's key stock index closed up 0.3 percent on Tuesday with trading companies surging, although further tightening of market liquidity by China's central bank capped the index's gains and offset expectations of strong economic data due for release this week.
The Shanghai Composite Index closed up 9.776 points at 3,246.874. The index rose nearly 1 percent in early trade, but news that the People's Bank of China had raised the auction yield of its benchmark one-year bills for a second week rekindled worries over monetary tightening and trimmed gains. "The lack of direction in the market, because of the balance of negative and positive news, kept trading sluggish today," said a senior dealer at a major Chinese brokerage in Shanghai. "This situation is likely to last for at least another few days."
Major trading company Shanghai Lansheng Corp was one of the biggest gainers, jumping its 10 percent limit to 20.08 yuan, while exporter Lao Feng Xiang Co also rose 10 percent to 32.55 yuan.
Trading companies, which are not a mainstream sector in China's stock market, were buoyed by improving prospects for a recovery in exports as the country's economy picks up steam. Most index heavyweights ended little changed, helping to keep the index rangebound. China State Construction Engineering Corp closed unchanged at 4.53 yuan.
Despite the index's slight rise, losing Shanghai A shares outnumbered gainers 479 to 406, while turnover fell to 162 billion yuan ($24 billion) from Monday's 169 billion yuan. "The market is under heavy pressure from gradual government monetary policy tightening and a huge number of new shares that regulators are pushing onto the market to cool asset prices," said analyst Li Wenhui at Huatai Securities in Nanjing.
However he added: "The market is still supported by China's strongly improving economy and consequently improving corporate earnings." The latest source of new share supply, a $1.5 billion initial public offer by China XD Electric, the nation's largest maker of electricity transmission and distribution equipment, is opening to subscriptions on Tuesday.
Investors are now awaiting Thursday's announcement of key Chinese data for the fourth quarter of 2009, which is expected to show the economy is on the track for a full recovery. They were particularly sensitive to movements in the consumer price index, as inflation would determine the strength of the government's monetary tightening, traders said.
Over the past two weeks, the central bank unexpectedly raised the one-year bill auction yield by a combined 16.59 basis points. It also surprised with a 0.5 percent rise in bank reserve requirement ratios as the government signals it is gradually exiting its ultra-loose monetary policy in place since late 2008.