Hong Kong shares climbed to a 19-month high on Wednesday with the market poised for more gains after a bill was passed in the United States to avert harsh tax hikes on most Americans, helping ward off fears of a recession in the world's largest economy.
Growth-sensitive counters led gains as midday turnover hit the highest since Dec. 5. More gains could be in store after the U.S. House of Representatives passed the bill shortly before trading stopped for the lunch in Hong Kong.
The Hang Seng Index went into the midday break up 1.9% at 23,089.9, its highest since June 2011 and decisively breaking above chart resistance at around 22,800 that has stymied gains for much of the previous two weeks.
The China Enterprises Index of the top Chinese listings jumped 2.9% to 11,765 points, its highest since February 2012. Chart resistance is seen at around 11,916, its Feb. 20 peak.
Both indexes had posted their best annual gains since 2009, rising 22.9 and 15.1%, respectively, in 2012.
"In the short term, U.S. risk premium will come down once a deal is struck and might trigger some reversal of flows back to the U.S., but the effects of that will probably be offset by flows from Japan as the yen continues to weaken," said Hong Hao, chief equity strategist at Bank of Communications International Securities.
"There's also an element of catch up today as people begin to return from their holidays and realise they have missed out on the December rally in the China market," Hong added.
An 18 percent gain in December, its best monthly showing since July 2009, helped propel the CSI300 of the top Shanghai and Shenzhen listings to its first annual gain in three years. Mainland markets are shut on Wednesday and will resume trade on Friday.
Aluminum Corporation of China (Chalco) jumped 4.2% to return to levels not seen since May 2012. It had finished 2012 up 5%, failing to retain much of its gains from early last year and underperforming the Hang Seng Index.
Metallurgical Corp of China Ltd jumped 4.6% after the company said it will transfer its 51.06% equity interest in loss-making Huludao Nonferrous Group to its controlling shareholder.
CHINA THEMATIC PLAYS STRONG
Chinese non-bank financial counters extended strength, with China Life Insurance the top percentage gainer among Hang Seng Index components, soaring 5.3% on Wednesday to its highest since August 2011.
New China Life Insurance surged 11% to its highest since June 14 after rising 14.6% in 2012.
The mainland's securities regulator had said over the weekend that it plans to allow eligible securities houses and insurers' asset management units to develop and manage mutual funds in a bid to reinvigorate an industry struggling to produce returns for investors.
This follows an announcement last week allowing brokerages to sell subordinated debt and the Chinese central bank pledging to quicken the pace of reforming the financial sector that sent shares of Chinese brokerages soaring last Friday.
Financial sector reforms in China are expected to stay a dominant theme in 2013, analysts say, as would Chinese urbanisation-related counters such as property developers, which were also stronger on Wednesday.
Country Gardens rose 3% ahead of the company's release of its nine-month net profit at midday that showed the mid-sized property developer posting a 34.4 percent rise in profit from a year earlier.
Sands China rose 1.8% ahead of data at midday that showed gambling revenue in Macau rose a higher than expected 19.6% in December from a year earlier, boosted by strong visitation numbers and spending by rich Chinese gamblers.
