Hong Kong stocks widened their gains on Thursday afternoon before closing up 368.47 points or 1. 85 percent, at 20,290.69.

The benchmark Hang Seng Index opened 0.87 percent higher at 20,095.53, recovering the 20,000 mark and prompting some analysts to see support at around 19,800. It moved between 20,095.53 and 20, 310.79 during the day's trading.

Turnover further shrank to 52.94 billion HK dollars (6.79 billion U.S. dollars) from Wednesday's 59.62 billion HK dollars, as investors remained cautious ahead of the four-day Chinese Lunar New Year holiday, which starts on Saturday.

The mainland-based banks contributed gains following the release of lower-than-expected 1.5 percent growth in consumer price index for January, which reduced the chances of a rate hike in the near term, analysts said.

Comments from Fed Chairman Ben Bernanke also suggested that an interest rate hike would not come soon, lending support to the financial shares on the market.

China Construction Bank gained 1.35 percent at 5.99 HK dollars, ICBC gained 1.27 percent at 5.6 HK dollars and Bank of China gained 2.41 percent at 3.83 HK dollars. The Bank of Communications, also a blue chip, surged 3.77 percent at 7.99 HK dollars.

Forty of the 42 blue chip stocks ended higher, with banking giant HSBC gaining 1.3 HK dollars, or 1.62 percent, to close at 81. 35 HK dollars.

Its local unit Hang Seng Bank added 0.4 HK dollar to close at 109.4 HK dollars.

Bank of East Asia, which reported a net profit of 2.57 billion HK dollars and declared a dividend of 0.48 HK dollar per share during the lunch break, surged 0.8 HK dollars, or 3 percent, to close at 27.5 HK dollars.

The commerce and industry sub-index rose 2.16 percent to lead the gains, followed by the properties category, which gained 1.95 percent, and the finance category, which gained 1.77 percent. The utilities sub-index gained 0.18 percent.

China Mobile, the leading mobile carrier on the Chinese mainland, gained 1.8 percent to close at 76.3 HK dollars. Smaller rival China Unicom surged 5.06 percent at 8.93 HK dollars.

The property shares also benefited from the lower than expected CPI for January on the mainland. Cheung Kong, the business conglomerate headed by Hong Kong's richest man Li Ka-shing, gained 1.9 percent to close at 93.65 HK dollars. Sun Hung Kai Properties, the leading residential housing developer, gained 1.78 HK dollars at 103.1 HK dollars. (7.8 HK dollars = 1 U.S. dollar)