Hong Kong stocks halted a three-day retreat and rose 361 points on the benchmark Hang Seng Index Wednesday after the US central bank pledged to keep borrowing costs near zero for an "extended period", easing fears of an interest rate hike in the near future.

The Hang Seng China Enterprises Index, which tracks the H-shares of Hong Kong-listed mainland companies, gained 2.1 percent to close at 12,188.28.

The US Federal Reserve has kept the federal funds rate target for overnight loans between banks in a range of zero to 0.25 percent since December 2008. Policy makers began using the "extended period" language in March 2009 and have repeated it at each meeting since then. Hong Kong typically follows the Fed's rate decisions because the local currency is linked to the US dollar. Low borrowing costs help demand for real estate.

"There will be no liquidity contraction in the near term," said Castor Pang, Cinda International Ltd's research director. "The US Fed will not increase the rate for a while. However, the overall turnover for the Hang Seng Index over the past week is still not high. Today's gain could only be a short-term recovery," he suggested.

Hong Kong & China Gas advanced 3.8 percent to HK$19.48 after posting a 20 percent gain in profit last year as mainland demand for the fuel increased. Net income rose to HK$5.18 billion ($668 million), from HK$4.3 billion in 2008. That beat the median estimate of HK$5.06 billion in a Bloomberg survey of eight analysts.

Hang Lung Properties climbed 3.2 percent to HK$32.05. Sun Hung Kai Properties Ltd gained 4.1 percent to HK$119.00.

Poly (Hong Kong) climbed 4.5 percent to close at HK$9.92. The company will pay HK$4 billion for Rapid Bloom, which has interests in four property development projects in China including in Shanghai and Hangzhou, the company said in a statement to the Hong Kong Stock Exchange yesterday.

SJM Holdings Ltd, the Macao casino company controlled by billionaire Stanley Ho, surged 6.3 percent to HK$4.41, and led Hong Kong-listed gaming stocks higher as analysts said the shares would benefit from a plan to limit further expansion of the industry.

Denway Motors Ltd, the Chinese partner of Honda Motor Co, tumbled 4.9 percent to HK$4.12, after saying its net profit declined 8.6 percent last year to 1.91 billion yuan ($280 million) and sales dropped 12 percent to 637.5 million yuan.

Agencies - China Daily

(HK Edition 03/18/2010 page2)