Hong Kong shares higher on technical rebound/muted impact from MSCI changes

HONG KONG (AFX-ASIA) - Share prices were higher in early trade on a technical rebound led by China Mobile, Hutchison Whampoa and HSBC, with investors largely ignoring the Morgan Stanley Capital International announcement reducing Hong Kong's weighting in its All Country World Index to 0.66 pct from 0.93 pct based on the new free float calculation, dealers said.

	    Buying in the bank and property sectors resumed on expectations that the U.S. Federal Reserve will further cut interest rates, while individual stocks which will either be included or removed from the MSCI indices performed accordingly, with Cheung Kong remaining flat since its inclusion has been widely expected, they said.

	    Amoy Properties, Cheung Kong Infrastructure and CASIL gained on their inclusion into the MSCI indices, while China Unicom fell as MSCI did not include the stock into its indices, dealers said.  

	    At 10:46 am, the Hang Seng Index was up 188.05 points at 13,647.23 on turnover of 2.36 bln hkd.

	    The Hang Seng May contract last traded at 13,685 points.

	    The Hang Seng China Enterprises Index was up 2.44 points at 509.08, while  the CAC Index was up 9.42 points at 1,250.73.

	    The Tracker Fund was up 0.15 hkd at 13.75 and the GEM Index was down 0.01 points at 261.09 on turnover of 106.21 mln hkd.

	    "The reduction in weighting has been widely expected by the market. 

That's why investors have ignored the changes, continuing to buy into the market betting on further interest rate cuts in the U.S.," Peter Lai, 

director with OCBC Securities, said.

	    Lai said while the reductiong in weighting will lead to fund outflows from the Hong Kong market, "the outflows will not happen overnight since the index adjustments will be completed in two years."

	    Cheung Kong, Cheung Kong Infrastructure, Hongkong Electric, Amoy Properties, MTRC and Hong Kong Exchanges and Clearing will be included in the indices.

	    "Cheung Kong's inclusion has been expected. But CKI's inclusion is a surprise to me," Lai said.

	    Cheung Kong was unchanged at 92.50, while CKI rose 0.30 to 13.25 and Hongkong Electric gained 0.35 to 28.25.

	    Amoy Properties rose 0.20 to 8.50, while MTRC was unchanged at 13.95.

	    Hong Kong Exchanges and Clearing gained 0.05 to 14.05.

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