Hong Kong shares were higher by midday Thursday, mainly driven by several Chinese companies that reported forecast-beating interim earnings, magnifying the lift from Wall Street gains on encouraging U.S. economic data.

But turnover on the Hong Kong bourse remained below average, fairly consistent with its last two sessions, suggesting investors are still not returning to the market in a big way even after a sharp drop in gold prices overnight.

Earnings are one way back into the market, but most fund managers remain very cautious despite thinking the market is oversold, said Castor Pang, Core Pacific-Yamaichi's head of research.

The Hang Seng Index was up 1.55 percent at 19,767.62 at the midday trading break, led by China United Network Communications Ltd's (Unicom) 13.4 percent gain after posting a smaller-than-expected first-half profit decline.

China Unicom, the only operator in the mainland selling Apple's iPhone, has been struggling to expand profit substantially because of heavy subsidies aimed at attracting a large user base at the expense of profitability.

In a note on Thursday, Nomura analysts said the company had successfully lowered the retail price of low-end smartphones to below 1,000 yuan, believing this could in turn benefit telecommunications equipment makers with China Unicom ties such as ZTE Corp and Lenovo Group Ltd .

Bank of China Ltd , BOC Hong Kong (Holdings) Ltd and CNOOC Ltd also posted gains after announcing strong first-half earnings. BOC Hong Kong, the only clearing bank for offshore yuan, gained 6.6 percent.

 

STRONG EARNINGS BOOST SHANGHAI IN STRONG TURNOVER

China United Network Communications Ltd (Unicom) and Bank of China Ltd were also the top boosts on the Shanghai Composite Index as investors piled into companies that reported strong earnings, driving midday A-share turnover to its highest in more than a week.

The Shanghai benchmark was up 1.72 percent at 2,584.86, with Bank of China up 1.7 percent and China Unicom surging 7.2 percent in midday volume almost three times its 30-day average.

Thursday's gains so far leave China Unicom poised to record its best one-day performance in eight months, but close to being oversold on the charts. Its H-share listing is down 6.86 percent on the quarter, compared with a 6.41 percent decline on the Shanghai benchmark.

Several heavyweights scheduled to announce interim earnings after markets close on Thursday also saw gains. Among them, PetroChina Co Ltd , Industrial and Commercial Bank of China (ICBC) and China COSCO Holdings Co Ltd .