Hong Kong stocks trimmed sharp gains in early trading but still rose 2.02 percent on Wednesday, tracking Wall Street's big rally overnight.

Boosted by Wall Street's strong gains overnight, the benchmark Hang Seng Index in Hong Kong soared 534.17 points, or 4.57 percent, to open at the day's highest 12,228.22.

But support above the important 12,000 mark was insufficient in trading after opening, trimming the market's gains to 236.61 points, or 2.02 percent, to close below the 12,000 level at 11,930. 66, just a tick off the day's lowest 11,904.61.

Turnover rose to 44.72 billion HK dollars (US$5.77 billion) from Tuesday's 33.49 billion HK dollars (US$4.32 billion)

Among 42 constituents of the Hang Seng Index, advancing shares greatly outnumbered losers 36 to five, with Bank of East Asia unchanged at 13.22 HK dollars.

HSBC, which accounts for the largest weighting of the benchmark Hang Seng Index, was once traded at intra-day high 42 HK dollars before gaining 2.26 percent to close at 38.65 HK dollars ahead of the ex-rights day set on Thursday, compared with its ex-rights price at 35.6 HK dollars set after trading closed.

HSBC has been the focus of the market after its proposed US$17.7 billion of rights issue triggered great downfall and volatility in the past week.

The Securities and Futures Commission (SFC) of Hong Kong confirmed here Wednesday that it has begun a formal investigation into the conduct of the closing auction session Monday for shares in HSBC Holdings.

The SFC said in a statement that the agency's investigation will include whether the closing price of HSBC on Monday was the result of any manipulation contrary to the Securities and Futures Ordinance or whether any licensed person has breached the SFC's Code of Conduct in distorting the market or the price of HSBC shares.

Price of HSBC's Hong Kong listed shares dived 13 percent from about 37.4 HK dollars (US$4.96) to 33 HK dollars (US$4.26) in Monday's last-minute closing auction session, shattering the benchmark Hang Seng Index.

HSBC's offer price in the five-for-12 rights issue was 28 HK dollars per share in a bid to raise US$17.7 billion from the market.

Another market heavyweight China Mobile, the market's largest stock by capitalization and the country's largest mobile phone operator, rallied 2.03 percent to 65.4 HK dollars.

Local banks in Hong Kong were higher after Citigroup said it operated a profit during the first two months this year. BOC Hong Kong, a bank note issuer in Hong Kong, rose 2.33 percent to 6.6 HK dollars. Standard Chartered Bank, another note-issuing bank, jumped 6.65 percent to 81.8 HK dollars. Hang Seng Bank, a major local bank controlled by HSBC, advanced 5.49 percent to 72.1 HK dollars.

Hong Kong Exchanges and Clearing Ltd., the market's sole operator, gained 4 percent to 58.7 HK dollars. The market operator was under criticism for the unlimited price range in closing auction late day trading period.

Hong Kong's property companies were all higher. Sung Hung Kai Property, the city's largest developer, increased 3.95 percent to 59.2 HK dollars. The real estate company reported its annual results after trading was closed. SHK's profits fell sharply by 95 percent on year on to 692 million HK dollars (US$89.3 million).

Cheung Kong, one of the largest property companies controlled by tycoon Li Ka-shing, rose 5.54 percent to 59.1 HK dollars. Hutchison, another conglomerate controlled by Li, added 1.65 percent to 37 HK dollars. Cheung Kong and Hutchison will unveil its annual results Thursday.

Henderson Land rebounded 4 percent to 24.7 HK dollars. Sino Land rallied 5.48 percent to 6.16 HK dollars. Hang Lung Property gained 2.66 percent to 14.68 HK dollars. New World Development went up 2.69 percent to 6.48 HK dollars.

China Enterprise Index, which reflect the performance of 42 major companies registered in the Chinese mainland, rose 127.07 points, or 1.85 percent, to close above the key 7,000 level at 7, 007.74.

Hong Kong-listed banks and insurers in the Chinese mainland all rose. ICBC, China's largest lender, rallied 1.56 percent to 3.26 HK dollars. Bank of China went up 0.46 percent to 2.2 HK dollars. China Construction Bank edged up 0.25 percent to 3.97 HK dollars. Bank of Communications added 1.33 percent to 4.58 HK dollars. China Merchants Bank rose 2.33 percent to 12.32 HK dollars.

China Life, the country's largest insurer, increased 3.74 percent to 22.2 HK dollars. Ping An, China's second largest insurance company behind China Life, jumped 3.65 percent to 39.75 HK dollars.

China's energy companies all rose though the U.S. energy department report showed global demand has slowed down. PetroChina, the country's largest oil producer, advanced 2.83 percent to 5.45 HK dollars. Sinopec, the country's largest refiner, added 1.83 percent to 3.9 HK dollars. CNOOC, China's largest offshore oil producer, gained 2.39 percent to 6.85 HK dollars.

(Xinhua News Agency March 11, 2009)