Hong Kong shares closed 12.8 percent higher yesterday, as regional bourses soared after interest rate cuts by the US Federal Reserve and China's central bank, dealers said.
The benchmark Hang Seng Index jumped 1,627.78 points to 14,329.85. Turnover was higher than recent sessions at 75.12 billion Hong Kong dollars (9.63 billion US).
Gains were spread across the board but China stocks, particularly banks and developers, outperformed on the back of the mainland interest rate cut. Resource stocks also benefited from strong market sentiment.
But dealers remained divided on the near-term direction of the market.
"Volatile trading sessions are likely to continue, but I think the current buying spree may continue," Kenny Tang, an associate director at Tung Tai Securities, told Dow Jones Newswires.
Tang said he expected the Hang Seng Index would test its 20-day moving average of 15,516 before "another wave of consolidation."
A flurry of interest rate cuts sparked the rally, adding more drama to a market that had swung wildly this week with a 12.7 percent loss Monday and a 14.4 percent gain Tuesday.
China and the US both said they were cutting interest rates late Wednesday, followed by Hong Kong and Taiwan yesterday, with Japan expected to follow today. South Korea cut rates Monday.
Banking giant ICBC rose 13 percent to 3.65 dollars and China Construction Bank jumped 19 percent to 3.79. Ping An Insurance rose 19 percent to 31.10 while China Life climbed 12 percent to 21.30.
Property firm China Overseas Land ended 19 percent higher at 8.00 dollars, Country Garden rose 9.4 percent to 1.28, China Resources Land was up 10 percent to 6.99.
Dealers said they were watching China's reaction to the global economic crisis as Beijing deploys a variety of tools to aid the economy, including the lending and deposit rate cuts announced late Wednesday.
"The key now is for the Chinese government to announce decisive and concrete measures to boost growth," Credit Suisse analyst Vincent Chan said.
"Recent developments seem to indicate that things are moving in this direction."
JP Morgan analyst Frank Gong predicted Beijing would further cut interest rates at least three times next year, each time by its typical increment of 27 basis points.
China also is expected to loosen credit controls and increase spending to help cushion the blow of the sinking global economy.
"Increasing credit support should help to loosen up liquidity and address the financing hurdle for the corporate sector," Gong said.
"We emphasise our view that more aggressive fiscal policy to boost end demand is essential."
Hong Kong shares were also helped by a sharp rebound on Asian markets, with Japan's Nikkei stock index closing up 9.96 percent, extending its gains into a third day, and South Korean shares up 11.95 percent.
In the energy sector, PetroChina jumped 20 percent to 5.90 dollars on higher-than-expected third-quarter net profit. Sinopec also rose 17 percent to 5.15 on expectations lower oil prices will benefit its refineries.