Hong Kong's main stock index powered to a 13-month closing high yesterday, with most blue chips enjoying gains as investors continued to bet on an economic recovery at home and overseas.

Hutchison Whampoa Ltd and sister firm Cheung Kong (Holdings) Ltd were both strong ahead of unveiling first-half report cards after the market close that largely met expectations.

The benchmark Hang Seng Index ended the day up 1.61 per cent, or 168.3 points, at 10,643.63, piercing through strong resistance at 10,600 points. The index closed at its highest level since July after two days of losses.

"We're turning quite bullish on Hong Kong stocks at the moment. We've seen lots of changes since SARS and the economy looks to be picking up," said Samantha Ho, fund manager at Manulife Funds Direct. "I think it could go to 12,000 points in the next six to nine months."

Hutchison shares rose 1.38 per cent to HK$55 before it reported a first-half net profit of HK$6.07 billion (US$778 million), while Cheung Kong, which has a nearly 50 per cent stake in Hutchison, said its first-half net profit totalled HK$4 billion. Cheung Kong shares ended up 3.67 per cent to HK$56.50.

Both companies are controlled by Asia's richest businessman Li Ka-shing.

Turnover was very heavy at HK$13.9 billion with lots of buying from overseas funds who see Asia benefiting from the US economic recovery, traders said.

The index has risen 14.2 per cent this year on hopes for an economic recovery both overseas and at home, where a new trade deal between Hong Kong and the mainland has raised high hopes for the retail and tourism sectors.

"People have been downgrading Hong Kong for so long now and it has lagged other Asia markets. It's Hong Kong's turn now," said Dale Tsang, managing director of securities trading at GC Capital.

Property counters had a good session on hopes that new visa relaxations will prompt frequent mainland visitors to buy or rent flats in the territory.

Swire Pacific Ltd rose 5.38 per cent to HK$41.10 and hit a one-year high, as did Henderson Land Development, which climbed 4.4 per cent to HK$28.45. Sun Hung Kai Properties climbed 3.88 per cent to HK$53.50. The property sub index rose 3.74 per cent.

Brokers said the HK$1.2 billion sale price for a large shopping and office complex in Causeway Bay by debt-laden Lai Sun Development was higher than expected, also boosting sentiment towards the sector. Lai Sun shares rocketed 34.42 per cent to HK$0.130.

There were also gains for two of the index's worst performers this year. Heavily weighted China Mobile (Hong Kong) Ltd, the world's largest mobile phone firm by subscribers, rose 1.82 per cent to HK$19.60.

Hong Kong's biggest phone company, PCCW Ltd, jumped 5.85 per cent to HK$4.525 after it said it would privatize affiliate iLink Holdings Ltd for a total of HK$96 million (US$12.3 million).

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