Hong Kong blue chips jumped 3.9 percent yesterday and mainland plays leapt 5.6 percent amid a broad-based rally, as investors cheered a record high on Wall Street on hopes that the fallout from the US subprime lending sector had bottomed.

"It's the world thinking that subprime is over," said Dale Tsang, managing director at Imperial Dragon Asset Management.

"People are jumping in to buy and catch up on their performance."

Trading volume was unprecedented, eclipsing Friday's record, as buying was frantic on expectations of greater fund inflows from the mainland, as more global Chinese stock funds were being launched under the country's Qualified Domestic Institutional Investor (QDII) scheme.

The benchmark Hang Seng Index cleared the 28,000-mark for the first time to end up 1,057.28 points at 28,199.75. Its day high was 28,256.80, marking its eighth consecutive record.

The China Enterprises index of H shares, or Hong Kong-listed shares in mainland companies, rose 955.93 points to close at 17,973.87, having earlier crossed the 18,000 threshold for the first time.

Mainboard turnover was a massive HK$163.1 billion (US$20.9 billion), beating Friday's HK$148.6 billion.

Some said a pullback was imminent in the near-term, given the market's sustained rally and its historic tendency to correct in October.

"Institutional investors are increasing their short positions. A lot of Chinese companies are at high valuations so I wouldn't be surprised to see some correction," said Ricky Tam, investment director at Champlus Asset Management.

High quality large-caps were the favoured plays, with mainland insurers among them.

China Life, the day's most active stock, raced up 8.4 percent to HK$48.4. Ping An Insurance (Group) Co of China Ltd advanced 8.7 percent to HK$117.

Resource stocks also shone, with Jiangxi Copper Co Ltd surging 9.5 percent to HK$27.55, having earlier tapped all-time highs, amid supply worries as strikes were pending at several Latin American mines.

Angang Steel Co Ltd, the mainland's No.3 producer of the metal shot up 15.6 percent to HK$34.80, after saying it planned to offer 195.8 million H shares on the basis of 2.2 rights shares for every 10 held at HK$15.91 each in Hong Kong.

Coal issues were led by China Coal, which jumped nearly 9 percent to HK$25.15.

Chinese paper maker Qunxing Paper Holdings Co Ltd debuted to a solid reception, despite shrinking margins among paper makers over high fuel prices. Qunxing ended the day at HK$8.58 for a 60.4 percent gain above its HK$5.35 IPO price after its US$206 million initial public offering drew heavy demand.

Reuters

(HK Edition 10/03/2007 page5)