Hong Kong shares finished sharply higher Monday on expectations of strong inflows from the Chinese mainland after the State Administration of Foreign Exchange allowed mainland residents to directly invest in Hong Kong stock market.

The blue-chip Hang Seng Index jumped 655.84 points, or 2.86 percent, to close at 23,577.73, the best closing in history.

The China Enterprise Index, which tracks the performance of 41 mainland companies listed in Hong Kong, rocketed 6.16 percent to all-time high 13,989.87 as many shares recorded a dazzling double-digit gains during Monday's trading.

Turnover soared to 126.35 billion HK dollars (US$ 16.21 billion) from Friday's 83.29 billion HK dollars (US$ 10.68 billion).

Expectations that funds from residents in China's mainland will flood the Hong Kong market in the wake of relaxed investment rules have boosted market sentiment in Hong Kong stocks.

According to China's relaxed investment rules, residents in China's mainland will be allowed to buy Hong Kong shares starting this week on a trial basis.

China Mobile, the country's biggest cellular phone operator and Hong Kong stocks' top company measured by market capitalization, surged 4.14 percent to 100.6 HK dollars, only a tick from an all-time high of 100.70 dollars recorded in Monday's trading. The company's gains alone pushed up the benchmark Hang Seng Index by 177.07 points.

CNOOC, China's largest offshore oil producer, jumped 7.04 percent to 9.58 HK dollars, contributing to 65.91 points of gains of Hang Seng Index.

Among the companies reporting first-half earnings Monday, China Life Insurance, the biggest insurer in China, soared 4.46 percent to 35.15 HK dollars, boosting the index by 44.9 points. The company reported after the trading closed that its half-year profit has leaped forward by 160 percent to 23.29 billion yuan (about US$ 3 billion).

China Construction Bank, the country's third-largest bank, also contributed 40.67 points of gains to the index by climbing 5.13 percent to 6.15 HK dollars after it reported a 47 percent rise in first-half net profit Saturday. Industrial and Commercial Bank of China, the country's biggest lender, gained 3.46 percent to 5.08 HK dollars.

Bank of China, the country's second largest lender, advanced 3.88 percent to 4.02 HK dollars. The stock fell Friday to its lowest level since its listing in Hong Kong in June 2006, after it said it is holding US$ 9.6 billion worth of securities backed by subprime mortgages in the United States. Analysts have slashed their ratings on the stock on concerns over a profit squeeze this year from the larger-than-expected subprime exposure.

Metal and resources shares of China's mainland were among Monday's top gainers as investors snapped up the stocks which were trading at prices lower than in Shanghai.

Aluminum Corp of China or Chalco, the country's largest aluminum refiner, rocketed 31.94 percent to 21.4 HK dollars. Chalco is trading at around 49.25 yuan in the Shanghai stock exchange, more than double its price in Hong Kong. Jiangxi Copper soared 26.01 percent to 19.28 HK dollars. China Shenhua gained 5.72 percent to 33.25 HK dollars.

PetroChina, or China's largest oil producer, climbed 4.69 percent to 11.6 HK dollars and Sinopec, Asia's biggest oil refiner, gained 3.8 percent to 8.47 HK dollars after the company said its first-half net profit rose 66 percent to 36.2 billion yuan.

Cosco Pacific jumped 5.62 percent to 20.3 HK dollars after the company said it has entered into an agreement to sell its entire investment in Bauhinia 97 Ltd. whose sole asset is a 20 percent stake in Chong Hing Bank Ltd. for 2.1 billion HK dollars.

China Cosco, the country's largest shipping conglomerate, surged 6.24 percent to 16 HK dollars.

(Xinhua News Agency August 28 2007)