Hong Kong cheer as Fed holds rates

TRADERS in

In the former British colony investors first toasted the Fed's decision to leave rates on hold, then took heart that fears over the possible return of the Sars bug were subsiding; and lastly convinced themselves that the local economy was on the mend. A higher Wall Street was also helpful.

As the benchmark Hang Seng index rose by 68.7 points to 11,140, they emphatically chose not dwell on the fact that only last week many of them had been muttering that the local bourse may be strongly overbought.

The 33-member lead indicator has risen strongly off its lows for the year, struck in late April. In a little under five months the market has risen by more than a third.

Though not quite in Tokyo's buoyant league, that is more than respectable. With Hong Kong's currency peg to the dollar, its interest rate environment is determined principally by Alan Greenspan and his team. Therefore, news that the Fed was intent on not raising borrowing costs for the foreseeable future provided a tonic for local shares, in addition to those elsewhere in Asia.

Hong Kong's banks, property stocks, airlines and retailers all enjoyed the sunnier mood. Global lender HSBC was up 50 cents or 0.5% at HK$102; affiliate Hang Seng Bank rose 50 cents or 0.6% to HK$88.5; and Bank of East Asia gained 25 cents or 1.3% to HK$19.10.

De facto flag carrier Cathay Pacific Airways, which had been rocked by recent fears that Sars may raise its ugly head once again, added 10 cents or 0.8% to HK$12.80. Conglomerate Swire Pacific, which is Cathay's largest shareholder, gained 70 cents or 1.6% to HK$45.30.

Esprit, the fashion retailer and a recent addition to the Hang Seng index, picked up ground ahead of full-year numbers, expected to be strong. Its shares firmed 15 cents or 0.7% to HK$21.80. It started the year at the HK$13 mark.

Japan also enjoyed Wednesday's festive mood as the Nikkei 225 pushed through the 11,000-points mark for the first time since July last year before falling back to close at 10.990.11, a net gain of 103.08 points. Earlier, Wall Street's firmer tone and a flood of foreign money had pushed the lead indicator up 178.52 points or 1.6% to 11.066.55.

Banks were once again the red-hot favourites, aided in part by confirmation that the Tokyo metropolitan administration is to reduce a controversial tax on the sector.

Mizuho Financial rose 22,000 yen or 10% to 242,000 and UFJ gained 17,000 yen or 3.8% to 463,000. Toshiba, which said on Tuesday it would report a first-half operating loss of 10bn yen (£54m) instead of a 2.9bn yen profit last time, eased two yen or 0.4% to 502.

In Australia, the hunt was on for counters with US exposure as investors sought to capitalise on the benign interest rate environment. Despite its organisational woes, logistics group Brambles Industries advanced five cents or 1% to A$482, while Rupert Murdoch's information giant News Corporation was hoisted by 36 cents or 2.8% to A$13.06. The All Ordinaries index rose 24.3 points to 3221.50, up 0.76%, taking its gains since its low for the year to 20%.

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