By Parvathy Ullatil
HONG KONG, Nov 3 (Reuters) - Hong Kong shares rose 5.3 percent on Monday, with Chinese banks leading the charge after a central bank official indicated Beijing had abandoned its strict caps on lending to try to shore up growth amid a global slowdown.
State media also quoted a central bank spokesman as saying the People's Bank of China must flexibly adjust its economic policies, including monetary policy. China has cut interest rates three times in six weeks after a series of tightening measures earlier to rein in runaway inflation.
"We are not sure about the impact this move will have -- whether banks will be willing to lend given the current global financial situation or whether there will be huge demand from property developers and industrial companies," said Steven Leung, sales director with UOB Kay Hian.
"But this is a major policy shift and that itself has improved sentiment greatly."
But index heavyweight HSBC lagged gains in the broader market with a 2.7 percent rise after Goldman Sachs downgraded the stock to neutral from buy, citing headwinds in the global lender's Asia and Middle Eastern business. The U.S. investment bank also slashed its target price on Europe's largest lender to HK$102 from HK$150.
Wireless carrier China Unicom, which announced a 13 percent drop in third-quarter earnings on Thursday, bucked the trend to drop 5.5 percent.
Analysts said the company's merger with fixed-line service provider China Netcom could be a drag on its business amid increased competition from rivals and a slowdown in China's economic growth.
The benchmark Hang Seng Index ended the morning session up 740.06 points at 14,708.73 in a strong start to a month investors hope will bring stability to the market after it posted its worst monthly drop in more than a decade in October.
Mainboard turnover fell to HK$30.5 billion ($3.9 billion) from HK$31.05 billion at midday on Friday.
Offshore oil specialist CNOOC shot up 8.6 percent as crude oil stayed firmly above $68 per barrel in Asian trade. Asia's largest oil and gas producer, PetroChina, jumped 6.8 percent.
The China Enterprises Index of top locally listed mainland Chinese companies gained 7.7 percent to 7,118.90, led by a 10 percent surge in China Construction Bank.
Top lender ICBC gained 9.6 percent, while Bank of Communications climbed 6.8 percent.
Property developer China Overseas Land Investment jumped 11.3 percent with easier lending seen helping demand in the ailing sector. Guangazhou R&F Properties rose 12.1 percent.
Chinese footwear maker Walker Group plunged 27.8 percent after it issued a profit warning on Friday, indicating substantial losses on account of slower sales due to the Sichuan earthquake and the Olympics, as well as mark-to-market losses on its investments.
CITIC Pacific which was suspended on Friday after a 21 percent surge in its share price early in the day, remained suspended pending a price-sensitive announcement.
Speculation is rife that the Beijing-backed conglomerate, which announced a $2 billion potential loss from bad currency bets last month, will see an asset injection from its parent -- CITIC Group -- to help support its operations.
Hutchison Telecommunications International Ltd added 7 percent after the company said its board was meeting on Nov. 12 to consider payment of a dividend.
"Our recent cut in our target price reflected our view of bumper special dividends as unlikely in current financial conditions where cash is king. HTIL's announcement indicates we could be wrong and bodes an immediate catalyst for what we consider is anyway a great defensive investment case in these markets. We stay buyers," said Citigroup analyst Anand Ramachandran on Monday.
Johnson Electric, which makes mini-motors, slid 11.3 percent after it said on Monday it expects second-half profit to be lower amid weakness in the automotive sector.
(Reporting by Parvathy Ullatil; Editing by Anne Marie Roantree) ASIA-PACIFIC STOCK MARKETS: Pan-Asia...... Japan........ S.Korea.... S.E. Asia............ Hong Kong... Taiwan..... Australia/NZ......... India....... China...... OTHER MARKETS: Wall Street........... Gold......... Currency.. Eurostocks........... Oil........... JP bonds... ADR Report.......... LME metals.. US bonds... Stocks News US... Stocks News Europe... DIARIES & DATA: IPO diary & data Asia earnings diary U.S. earnings diary European diary Taiwan diary Wall Street Week Ahead Eurostocks Week Ahead World forecasts TOP NEWS: For top Asian company news, double click on: U.S. company news European company news Forex news Global Economy news Technology news Telecoms news Media news Banking news Politics/General news Asia Macro data A multimedia version of Reuters Top News is available at: http://topnews.session.rservices.com LIVE PRICES & DATA: World Stocks Currency rates Dow Jones/NASDAQ Nikkei FTSE 100 Debt Hong Kong Dollar LME price overview Keywords: MARKETS HONGKONG STOCKS
(Reuters Messaging: parvathy.ullatil.reuters.com@reuters.net; +852 2843-6415)
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