Hong Kong and Shanghai stocks rose on Monday, with the Hang Seng Index poised to post its biggest single-day percentage gain in four weeks as Chinese banks rebounded on improved market sentiment.
The Hang Seng Index finished morning trading up 0.71% at 20,744.37, ending six straight sessions of losses and tracking stronger overseas markets as confidence for a recovery in the U.S. economy improved after comments from the Federal Reserve.
Short-covering helped boost Chinese banks after they reported strong quarterly earnings with Industrial and Commercial Bank of China up 1.8% and Bank of China up 1%.
Agricultural Bank of China Ltd, the country's third-biggest lender, fell 1.1% after it reported on Friday a 40% rise on first-half profit to 45.8 bln yuan. The result was slightly below the average forecast of 47.1 bln yuan from a Reuters survey of three analysts. Agbank said on Monday that full-year profit could exceed forecasts.
Analysts said Beijing's measures to curb property market speculation may affect Chinese banks.
"The upside for banks is limited, in particular new loan growth in the second half year is expected to be slower," said Patrick Yiu, a director at CASH Asset Management. He tipped the Hang Seng Index to be capped at around 20,800 points.
China Mobile Ltd fell 1.7% on concern that Vodafone Group Plc may sell assets including its 3.2% holding in the mobile operator, as the world's largest telecom operator by revenue started to retreat from sprawling international expansion.
China Shenhua Energy Co rose 1.6% after the world's most valuable coal producer posted a record second-quarter profit on higher sales. Dongfeng Motor Group Co climbed 4.2% after it said first-half net profit more than doubled.
SJM Holdings, Macau's largest casino operator controlled by gambling tycoon Stanley Ho, advanced 2.8% ahead of the release of second-quarter earnings later on Monday.
SHANGHAI HIGHER
China's key stock index was up 1.5% by midday on Monday, amid a global market rally, while stocks linked to the country's tourism island Hainan outperformed because of a plan to boost it as an international holiday destination.
Analysts said Wall Street's rise inspired gains in Chinese shares as investor worries over the global economic outlook eased after Bernanke told central bankers that the Federal Reserve was ready to take further steps to spur recovery.
The Shanghai Composite Index was at 2,648.6 points at midday, reversing last week's 1.2% fall caused by increasing worries over the health of major global economies and uncertainties surrounding China's property policies.
"The global market rally is playing a role in boosting the Chinese stock market," said Chen Shaodan, an analyst at China Development Bank Securities in Beijing.
All 20 Hainan companies listed on the Shanghai and Shenzhen exchanges rose. Hainan Strait Shipping Co gained 5.8% and Hainan Yedao (Group) Co was up 4%.
China Satcom Guomai Communications Co Ltd was the biggest gainer on the Shanghai market, up by its 10% daily limit after a media report of a cooperation with China Telecom Corp.
"After last one week's correction, investors expect the short-term correction has finished," said Cao Xuefeng, a head of research at Huaxi Securities.
Turnover of Shanghai A shares jumped to 61 bln yuan ($8.97 bln) from Friday morning's 36 bln yuan — anindication that investor sentiment was improving.
Gaining stocks outnumbered losers 865 to 28.
