Hong Kong and China shares rose on Tuesday, bolstered by Chinese financials after mainland media reported that Beijing's regulator is allowing banks to make new loans to complete unfinished local government investment projects.
The Shanghai Composite Index reversed early losses to end up 0.2 percent, producing its eighth-straight daily gain and its highest close since Nov. 17. A-share turnover declined from Monday's near one-year high, but stayed robust.
The China Enterprises Index of the top mainland listings in Hong Kong rose 1.9 percent. The broader Hang Seng Index gained 1.7 percent to 21,568.7, shy of 21,725.6 top end of a gap that opened up between Aug. 4 and 5 that it briefly tested last Monday.
Expect more policy-driven moves among Chinese shares as we approach the National People's Congress meeting in Beijing next week as the various government departments put out their agenda listing various policy changes, said Edward Huang, an equity strategist in Hong Kong at Haitong Securities International.
On Tuesday, news reports saying Chinese banks can now extend new loans to public infrastructure projects that are at least 60 percent complete were seen as Beijing's latest step to avert debt defaults by cash-strapped local governments.
The mainland's biggest lender, Industrial and Commercial Bank of China (ICBC) , rose 2.7 percent in Hong Kong and 0.2 percent in Shanghai.
The Shanghai Composite Index is now up almost 7 percent in February, outpacing the Hang Seng Index's 5.8 percent and the China Enterprises Index's 4.1 percent after lagging its Hong Kong peers in January.
Shanghai's close last week above the 125-day moving average prompted predictions that the market could keeping rising, thanks to expectations for more selective easing and policy support for certain sectors.
CORPORATE EARNINGS IN FOCUS
Gains in Hong Kong accelerated in the afternoon session after European stock futures opened higher. Turnover stayed relatively lackluster as investors took stock of a rally that has taken the Hang Seng up 17 percent this year.
Corporate earnings are likely to be a key factor for investors the next few weeks as Hong Kong and China blue-chips announce 2011 results, starting with the property sector.
Country Garden Holdings Co Ltd, the mainland's fifth-largest property developer by sales value, rose 3.4 percent after posting a 35.5 percent gain on 2011 profit at the midday trading break.
The result also lifted the sector, with Evergrande Real Estate Group Ltd up 4.4 percent.
HSBC Holdings Plc, the biggest component, limited the index's gains on the day, as it fell 0.7 percent the day after it reported profit for 2011 just shy of $22 billion.
HSBC currently trades at about 8.9 times forward 12-month earnings forecasts, according to Thomson Reuters StarMine, a 25.7 percent discount to historical median levels.
Hong Kong bellwether Sun Hung Kai Properties Ltd, Asia's largest property developer by market value, gained 2.6 percent and then, after the market close, posted first-half underlying profits of HK$11.8 billion ($1.52 billion).
This was 13 percent more than a year earlier and slightly above a HK$11.5 billion Reuters consensus among six analysts.
During a three-week period that ended Monday, nine out of 18 analysts raised their 2012 earnings forecasts for Sun Hung Kai Properties by an average of 1.3 percent. During that period, the stock has risen 7.3 percent, according to StarMine.