Hong Kong's leading share index powered to a 15-month closing high yesterday, as growing signs that the territory's economy is on the mend fired up property stocks.

The benchmark Hang Seng Index ended up 3.21 per cent, or 351.53 points, at 11,295.89, its highest close since June 2002 and the biggest percentage jump since April.

Sun Hung Kai Properties Ltd, one of the territory's leading residential developers, surged 8.51 per cent to HK$63.75 after analysts said it would complete fewer residential flats over the next three years, effectively cutting supply.

Its rival Henderson Land Development Ltd was another star performer, gaining 8.94 per cent to HK$32.30.

"The change in the Hong Kong exchange rate together with strong fund flows has fuelled the rally," said Daniel Poon, head of Hong Kong and China Equities at ABN AMRO Asia Ltd.

The Hong Kong dollar spot exchange rate appreciated to its strongest level since the 1997/98 Asian crisis on Tuesday, and far stronger than the HK$7.80 per dollar level of the Hong Kong currency peg.

It remained firm yesterday but analysts expected the HK dollar to inch back towards its pegged level gradually.

"People worried about the peg for too long. It's another sign the economy is getting better and it looks like people think Hong Kong is cheap," said Dale Tsang, managing director of securities trading at GC Capital Asia Ltd.

Tsang said the exchange rate appreciation had encouraged investors to put money back in the stock market, helping turnover surge to HK$19.8 billion (US$2.56 billion), the highest this year.

Reuters

(HK Edition 09/25/2003 page7)