Stimulated by the strong performance of US stock markets and the encouraging economic data from Europe, Hang Seng Index closed up 1% at 20,815. HSCEI rose 1.3%. Market turnover increased to $69.9 billion. Heavily weighted HSBC (5) added 1.3% while China Mobile (941) closed flat. Hong Kong property stocks ended higher, led by New World Development (17) and Wharf (4) which rose 3.6%-3.7%. Steel and airline stocks underperformed the index due to profit taking. Air China (753) and Angang (347), the two worst performing HSCEI constituents, dropped 1.7%-2.0%. COSCO Pacific (1199) and China Resources Power (836), the best and worst performing constituents of Hang Seng Index, went up 4.3% and down 1.3% respectively. The strong rebound in Euro helped boost Esprit (330) up by 4.1%. Cyclical stocks including cement, shipping, coal and nonferrous metals counters continued to outperform the index. CNBM (3323) and Anhui Conch (914) rose 7.1% and 2.3% respectively. Meanwhile, China Shipping Development (1138), China Shenhua (1088), China Coal (1898) and Jiangxi Copper (358) jumped 2.8%-3.6%. ABC (1288) advanced 5.5% to new high since its IPO listing whilst Citic Bank (998) surged 4.5%. The remaining five Chinese banks all increased with an average gain of 1.1%. Performances of top ten PRC property developers were mixed, with Shimao Property (813), Longfor Properties (960) and Agile Property (3383) soared 2.6%-3.9%. We believe the Hang Seng Index may reach 21,000 this week.

CITIC Pacific (267, $15.64) 12M Target $19.2 BUY