Hong Kong and China shares jumped on Wednesday, lifted by growth-sensitive sectors that helped benchmark indexes close above long-term resistance levels for the first time since mid-2011, pointing to further strength ahead.
The Shanghai Composite Index ended at its highest since Dec. 1 while the Hang Seng Index produced its best close since Aug. 4.
Gains accelerated in rising turnover after mid-morning comments by China central governor Zhou Xiaochuan that Beijing will continue to invest in euro zone government debt triggered more short covering, traders said.
The Shanghai index closed up 0.9 percent at 2,366.7. It was the first time since May that the index finished above its 100-day moving average. The China Enterprises Index gained 2.4 percent.
The Hang Seng rose 2.1 percent to 21,365.2, as strength in Hong Kong developers helped push it above its 250-day moving average for the first time since July. Multiple efforts to breach that point had failed in the past week.
Trading picked up on Wednesday. For Shanghai A-shares, turnover was close to a peak reached more than a more ago while in Hong Kong it was the second-highest since Dec. 1.
Overseas sentiment, especially in Japan, was an early boost. Strength in Hong Kong developers comes from investors rotating into the sector, which has been a relative laggard so far this year, said Alex Wong, director of asset management at Ample Finance.
Asian markets were up from early on Wednesday, led by Tokyo thanks to steps the Bank of Japan announced on Tuesday to expand its asset-buying programme to set an inflation target to pull the economy out of deflation.
HSBC Holdings Plc, Europe's largest bank and the Hang Seng Index's biggest component, rose 1.9 percent to its highest close since October, spurred by an expected commitment by Greek leaders to the country's international lenders that would avoid a messy default.
Hong Kong developers extended gains, partly on a short squeeze. Henderson Land surged 6 percent while Sun Hung Kai Properties Ltd jumped 4.3 percent, each in more than triple its respective 30-day average volume.
On Tuesday, when shares of SHK rose 3.5 percent, short-selling accounted for more than 12 percent of its total turnover, the highest level since Jan. 30.
Before Tuesday, SHK was up 12.8 percent for the year. Among other Hang Seng Index components, Cosco Pacific Ltd was up 36 percent and Ping An Insurance (Group) Co of China Ltd was up 27 percent over the same period.
FINANCIALS, MATERIALS LIFT SHANGHAI
Chinese financials were strong in Hong Kong and mainland markets. China's biggest lender, Industrial and Commercial Bank of China (ICBC) gained 3.2 percent in Hong Kong and 0.5 percent in Shanghai.
With the prospect of more gains, insurers and brokerages, seen as barometers of the mainland Chinese stock markets given their large investment and involvement, were strong as a result.
In Shanghai, Ping An Insurance and Citic Securities Co Ltd gained 1.7 and 2 percent respectively.
Comments by China's central bank governor eased some lingering gloom on Chinese export demand from Europe as a result of the region's lingering debt debacle, lifting growth-sensitive sectors.
The Shanghai materials sub-index was up 1.5 percent. China Shenhua Energy Co Ltd, the mainland's largest coal producer, gained 0.6 percent. Anhui Conch Cement rose 1.2 percent in Shanghai and 4.6 percent in Hong Kong.
The next upside target for the Hang Seng Index is seen at about 21,725, the top end of a gap that opened up between Aug. 4 and 5, while 2,400, which was support in late November, is eyed on the Shanghai Composite.