Hong Kong shares climbed to a second-successive 19-month high, as investors chased Chinese property stocks and growth-sensitive laggards after more positive economic data affirmed the recovery trend in China.
On Wednesday and Thursday combined, turnover was $22.1 billion, the highest for any year's first two trading days.
The Hang Seng Index ended up 0.4% at 23,398.6, its highest since June 1, 2011. The China Enterprises Index of the top Chinese listings in Hong Kong, added 0.8%, reaching another peak since August 2011.
On Wednesday, the HSCE jumped 4%, its biggest gain in a year. Its relative strength index (RSI) value suggests that the H-share index is now at its most overbought since October 2010.
Mainland China markets stayed shut on Thursday for the New Year holiday and will resume trading on Friday.
"Strength in the Chinese property and insurance sectors is underpinned by solid investment themes," said Alex Wong, director of asset management at Ample Finance Group.
"There's some rotational buying going on after the big jump yesterday, as well as some more chasing of 2012 laggards," added Wong, who said he bought shares of Asia insurance giant AIA Group on weakness on Thursday.
Shares of Country Garden posted an eighth-straight gain, surging 6.3% on Thursday after it announced it is conducting an international offering of senior notes with a 10-year maturity, which was met by solid demand.
Shimao Properties surged 9.6% after it reported a 50% jump in contracted sales in 2012 from the previous year, suggesting that demand in the mainland remained robust despite curbs on home purchases.
Citi analysts said in a note dated Jan. 2 they expect the rapid increase in market transactions in the last quarter of 2012 will carry into this year, with smaller developers starting to aggressively buy land in the second quarter.
Citi's top picks in the sector include counters that are focused on tier 1 and 2 cities, have high sales-growth sustainability and good execution ability. Among its picks are Shimao, China Resources Land and Shenzhen-listed China Vanke.
China Resources Land rose 4% to a record closing high on Thursday. It surged 69% in 2012, compared with the 23% jump for the Hang Seng Index.
Chinese coal stocks, among the biggest laggards in 2012, rose on Thursday on hopes of improving economic growth. In 2012, these stocks were hurt by expectations of reduced demand as China's economy slowed.
Growth in China's increasingly important services sector accelerated in December at its fastest pace in four months, adding to signs of a modest economic revival at year-end.
Yanzhou Coal, down 22.7% in 2012, rose 2.5% on Thursday. China Coal Energy, up 0.5% in 2012, climbed 1.5%.
Chinese power producers had the bigger percentage losses on the day. Huaneng Power, which closed at a five-year high on Wednesday, dropped 2.6%.
COMEBACK OF DISCRETIONARY SPENDING
The Chinese auto sector was also a key outperformer on the day, with traders citing a mainland news report that Beijing city government bought 5,000 new energy vehicles providing more fodder for a comeback for Chinese consumer discretionary stocks.
Geely Auto, up 8.4% in 2012, rose 3.9%, while Baoxin Auto, down 0.9% in 2012, surged 11%.
The sector's broad strength contrasted with the slump in the shares of Korean rivals as the rising won threatens to sap their profits. Shares of Japanese peers did not trade as Tokyo's market remained shut for the New Year holiday.
Jewellery counters got a boost from an upgrade from Morgan Stanley on Thursday, with their analysts forecasting that the jewellery and watch retail cycle is poised to accelerate.
Chow Sang Sang jumped 12.8%, while Luk Fook spiked 8.3% ahead of a Hong Kong retail sales report after the market close. The report said November sales were 9.5% above a year earlier.
