Shanghai and Hong Kong shares rose on Monday morning as strong corporate earnings and a weaker dollar lifted commodity and energy-related plays.
Hong Kong's Hang Seng Index was up 0.94% at 23,738.09 by the midday trading break. The index faces resistance at its 28-month peak around 23,850, a level that also coincides with the 61.8% retracement of the benchmark's slide from its October 2007 peak to its October 2008 trough.
Shanghai's key stock index was up 1.3% by midday, with gains in metals and heavily-weighted financials counters helping to lift the index above the key psychological 3000-level.
The index was up 39 points at 3,014 at the midday break.
Financial issues were led by jumps in brokerages as a pick up in trading activity on local bourses pointed to a recovery in investor sentiment.
The Shanghai Composite is up 13.5% this month, despite a surprise interest rate rise by China's central bank last week, cutting losses for the year to 8% compared with 18.9% at the end of September.
"The market has mostly digested the impact of the interest rate rise," said Zhang Gang, analyst at Central Securities in Shanghai.
Top brokerage Citic Securities Co rose 7.4%, providing the biggest boost to the benchmark. Rival Haitong Securities Co rose 10%.
Turnover in the morning session rose to 127 bln yuan ($19.1 bln) from 104 bln yuan at midday on Friday.
Non-ferrous metal plays rose in a continuation of a recent rally in materials stocks on the back of a weakening dollar.
Xiamen Tungsten, Sino-Platinum Metals and Baoji Titanium Industry all jumped by their 10% limit.
China Vanke Co Ltd the country's top listed developer, gained 2.8% after posting a 6.1% rise in third-quarter net profit.
COAL STOCKS SUPPORT HK
Hong Kong's benchmark index rose 0.9%, underpinned by a rally in the energy sector as coal stocks in particular jumped on optimism over earnings.
Yanzhou Coal Mining rose 7.6%, leading a rally in the sector after the company reported a 227% surge in third-quarter profit.
Larger rival China Shenhua Energy, due to report earnings later this week, was up 3.9%. China Coal Energy, set to report earnings on Tuesday, was up 4.1%.
Yanzhou is up 35% this year, trading at a 24% premium to its 10-year median forward 12-month price-to-earnings multiple, prompting some market players to take a cautious stance on the stock going forward.
Traders at Samsung Securities said in a note to clients that they expected the stock to underperform in the medium term, given that the company's results excluding a forex gain were weak.
Hong Kong Exchanges & Clearing, which operates the Hong Kong stock exchange, rose 4.4%, extending gains for the month to 17.6% after advancing 25.3% in September.
A big rise in turnover, a robust IPO pipeline in Hong Kong and hopes for new products as a consequence of Beijing's yuan liberalisation moves have driven investor interest in HKEx in recent weeks.
Goldman Sachs said it expected the recent surge in average daily turnover to levels last seen in 2007 to continue, reflecting a strong Chinese economy, improved market sentiment and increased fund inflows into Asia.
The brokerage has a "buy" rating on the stock and a 12-month price target of HK$221, a 23% upside from current levels.
Evidence of the growing dominance of HKEx amongst regional exchanges is the surprise launch by Singapore Exchange Ltd of a takeover offer for Sydney-based ASX Ltd in a bid to attract new listings, spur turnover and ward off the threat of alternative trading venues.
