Hong Kong shares firmed on Friday morning in good volume lifting the benchmark index to a five-month high with investors riding a rally in risk assets across Asia.
The Hang Seng Index was up 1.08% at 21,925.67 by the midday trading break and was higher on the year for the first time since mid-April. The China Enterprises Index gained 1.28% to 12155.26.
After a strong start to the week following better-than-expected data from China and the U.S., the market is poised for its sharpest weekly gain since mid-April.
"With the Aussie and the euro rallying today, people are watching whether the Shanghai Composite is going to hold up. Once that bounced off the 2,595 support, momentum traders rushed in," said Christian Keilland, head of trading at brokerage BTIG in Hong Kong.
Stocks with a high beta — the measure of volatility relative to the broader market — rallied as market players chased outperformance while heavily-weighted large cap banking shares recovered from their recent losses.
Citic Pacific Ltd, which has a beta of 2.22, the highest among Hang Seng Index constituents, according to Thomson Reuters data, rose 3.1%.
Utility companies added to Thursday's gains amid talk of higher tariffs.
Datang International Power Generation Co Ltd rose 3.3%, bringing its two-day gain to 10%. Huaneng Power International Inc was up 5.2% helped by an injection of energy assets into the company by its Chinese parent.
Consumer-related plays rose with Belle International Holdings Ltd, a recent addition to the Hang Seng Index, rising nearly 4%. Tsingtao Brewery Co Ltd was up 6% on healthy volumes.
Bucking the broader trend, Agricultural Bank of China Ltd fell 1.1%. AgBank, which has the lowest tier-1 ratio among the big four Chinese banks, saw its shares slip below their listing price in Shanghai on Tuesday.
SHANGHAI FIRMS
China's key stock index was up 0.3% by midday Friday, in low volume, bouncing off a technical support at around 2,595.
The Shanghai Composite Index was at 2,609.2, recovering from Thursday's 1.9% fall. Analysts said the index had room to drop further but they saw near-term support around the index's 60-day moving average at 2,580.
Turnover was subdued as investors chose to stay away after trimming position in previous sessions ahead of the long holidays in the mainland in coming weeks.
China will see two major national holidays in the next three weeks, during which the market will be open for a combined seven trading days, with two weeks having either one or two days.
Analysts said the outlook for the broader market in the near term was not optimistic, despite strong gains in specific sectors such as food and beverages as bank shares would likely remain under pressure because of policy.
Power stocks supported the index after state media reported several Chinese provinces were considering raising electricity prices, which could be followed by others.
Huaneng Power International Inc was up 5.1%.
Financials were the biggest drag on the index with heavyweight Agricultural Bank of China Ltd down 1.5%. China Ping An Insurance fell 0.5%.
