Hong Kong stocks rose yesterday, with property firms gaining on hopes of a homebuying spree as expectations grew that the US Federal Reserve(Fed) would cut a key interest rate this week.

Weak US housing data have persuaded investors that a half-point reduction in the benchmark federal funds rate will be unveiled at the Fed policy-setting meeting on January 29-30.

The market rose nearly 3 percent at one point, but ended near the intraday low, as investors remained cautious after multiple sessions of steep falls in the last week.

"We're just rattling around after the shock," said John Schofield, fund manager at Tempus Investment.

"I'm not sure if the market has priced in a (50-basis point cut). It's as much psychology as anything. People are still waiting for reality before they place their buy orders."

Analysts said they expect the market to trade sideways in the near-term within 23,800 and 25,000 points.

The benchmark Hang Seng Index closed up 1 percent, or 238.19 points, to end at 24,291.80 points. The China Enterprises Index of H shares, or Hong Kong-listed shares in mainland companies, gained 0.5 percent, or 59.69 points, to 13,379.18.

Mainboard turnover was a low HK$92.6 billion compared to Monday's HK$107.8 billion.

Coal shares advanced further in heavy trade after the mainland ordered a halt to coal exports for at least the next two months to help end its most severe power crisis yet.

The Hang Seng property sub-index outperformed with a 2.1 percent gain. Sun Hung Kai Properties jumped nearly 4 percent to HK$159.7 and Cheung Kong rose 2.1 percent to HK$127.70.

Hong Kong usually mimicks US rate moves because of a currency peg. The prospect of lower mortgage rates at a time when the city's economy is thriving should spur home sales and prices, and benefit developers.

Europe-focused apparel retailer Esprit Holdings vaulted 3.5 percent to HK$98.4 a day before its first-half earnings report. Esprit is expected to report earnings rose above 30 percent amid a strong euro.

Reuters

(HK Edition 01/30/2008 page2)