HONG KONG (XFN-ASIA) - Share prices were sharply higher after Beijing announced a mach-awaited plan to stimulate domestic demand and boost economic growth.

China stocks led the gainers, with construction-related stocks and banks surging after China announced last night that it will spend about 4 trln yuan by the end of 2010 on a host of infrastructure and social welfare projects.

The market was also supported by local property firms after banks announced cuts in local prime lending rates.

HSBC was up more than 2 pct despite some expectations that it might incur up to 3.7 bln usd third-quarter bad loan charges in its US unit.

At 10:54 am, the Hang Seng index was up 596.79 points or 4.19 pct at 14,840.22, off a low of 14,830.34 and high of 15,147.96.

Turnover was 16.44 bln hkd.

"Everybody welcomes China's decision to boost its economy and loosen its monetary policies in a big way and this explains the early strong gains paced by H-shares," said Dennis Poon, research head, South China Securities.

"Construction-related firms, like materials suppliers and developers, banks and consumer products producers are widely expected to benefit most from China's latest move to boost its economy," he said.

Local property firms also supported the market after major local banks cut their best lending rates by 25 basis points from today.

"This rate cuts are certainly helpful to local property firms. However, the gains in the sector may not be sustained near-term because of forecasts that housing prices will fall by up to 10 pct next year," Poon said.

HSBC has lowered its best lending rate in Hong Kong by 25 basis points to 5.0 pct, while Standard Chartered and Hang Seng Bank also announced 25-basis point cuts in their prime rates following a drop in interbank rates.

Poon noted that HSBC was firm despite fears that its US unit might suffer a 3.7 bln usd bad loan charge for the third quarter.

"It has maintained its dividend policy and this has given some assurance to investors despite the difficulties that it is facing," he said.

HSBC last week declared third interim dividend of 0.18 usd per share for 2008.

Faced with a worsening global economy, the lender's Asian unit, Hongkong and Shanghai Banking Corp, may lay off about 600 more staff, The Standard reported, without citing sources.

In September, HSBC laid off 1,000 employees worldwide, including 100 in Hong Kong, from its global banking and markets businesses.

Poon said China Mobile and other large-caps also underpinned the key index.

HSBC gained 2.0 hkd or 2.17 pct at 94, China Mobile rose 5.40 hkd or 7.93 pct to 73.45, Hong Kong Exchanges was up 4.45 hkd or 6.1 pct at 77.25 and China Life rose 2.05 hkd or 9.93 pct to 22.70.

China banks were sharply higher, with ICBC surging 0.34 hkd or 9.14 pct to 4.06, China Construction Bank up 0.48 hkd or 11.91 pct at 4.51 and Bank of China up 0.20 hkd or 9.39 pct at 2.33.

The finance sector sub-index gained 1,124.50 points or 4.99 pct at 23,648.18.

China infrastructure plays surged on Beijing's massive public spending plan.

Among China construction materials suppliers, China National Building Materials soared 1.11 hkd or 26.98 pct to 5.13, China National Materials (Sinoma) was up 0.63 hkd or 24.9 pct at 3.16 and Anhui Conch gained 6.70 hkd or 24.81 pct at 33.70.

Among infrastructure plays, China Railway Construction surged 1.84 hkd or 20.45 pct to 10.72.

Metals firms also posted sharp gains, with Chongqing Iron & Steel rising 0.28 hkd or 22.31 pct to 1.48, Angang Steel gained 1.08 hkd or 21.77 pct at 6.04 and Maanshan Iron & Steel was 0.36 hkd or 22.02 pct higher at 2.05.

China retailers were also higher on expectations of a surge in demand following Beijing's stimulus measures.

Parkson Retail Group surged 0.38 hkd or 5.65 pct to 7.10 and Golden Eagle Retail Group rose 0.13 hkd or 3.02 pct at 4.43.

Mainland property firms rose sharply on hopes for easier bank credit for the sector.

Agile Property rose 0.31 hkd or 10.51 pct to 3.26, China Overseas was up 0.68 hkd or 7.23 pct at 10.08 and Guangzhou R&F was up 0.82 hkd or 17.63 pct at 5.47.

Among local property firms, Cheung Kong rose 2.75 hkd or 3.47 pct at 81.95, Henderson Land was up 0.85 hkd or 2.83 pct at 30.85 and Sino Land was up 0.55 hkd or 7.89 pct at 7.52.

The property sub-index was up 597.08 points or 3.42 pct at 18.043.78.

Li & Fung, a global consumer products trading firm, fell 0.52 hkd or 3.35 pct to 14.98 on news that it plans to cut some jobs in business units whose customers have suffered the most from the economic slowdown.

Oil stocks were higher on expectations of stronger demand as China moves to boost its economy. CNOOC gained 0.48 hkd or 8.07 pct at 6.43, PetroChina rose 0.47 hkd or 8.22 pct to 6.19 and China Petroleum and Chemical Corp (Sinopec) was up 0.37 hkd or 8.13 pct at 4.92.

The Hang Seng China Enterprises index was up 689.81 points or 10.08 pct at 7,479.40.

(1 usd = 7.8 hkd)

jun.concepcion@xfn.com - xfnjcc/xfnrc

COPYRIGHT

Copyright Thomson Financial News Limited 2008. All rights reserved. The copying, republication or redistribution of Thomson Financial News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Financial News.