Amid US stock stabilized last Friday, as well as the lack of further tightening measures launched during weekend, HK stock market opened higher on Monday but the HSI was capped by previous day high resistance at 23,600 and the gain cannot be extended. A share reversed early weakness in the afternoon once boost HK stock market, but its momentum is short. Late selling pushed the HK stock market to erased most gain and finished the day 83 points lower at 23,238. H share index also lost 132 point while market turnover dropped to HK$75.9bn, reflecting investors cautious attitude. Commodity price soared which help to lift China commodity plays with CNOOC (0883.HK) rising 2.4%. On the other hand, with anticipated cancel of purchase subsidies in the coming years, Geely (0175.HK) lost 5.0%.

Hong Kong shares ended higher Tuesday, tracking a rebound in China shares despite a report the mainland's central bank may raise interest rates this weekend.

The blue-chip Hang Seng Index rose 190.46 points, or 0.8%, to 23,428.15 after trading between 23,101.81 and 23,475.29 during the session.

Market volume totaled HK$72.68 billion, down from HK$75.94 billion Monday.

Analysts said they expect the index to trade in a range of 23,000 to 24,400 points for the rest of the year as investors continue to focus on the state of the economic recovery in Europe and the U.S., as well as China's reaction to rising inflation.

'If there is a rate hike, it will clear the uncertainty. It will be good for the Hong Kong market,' said Louis Wong, research director at Philips Securities.

The Shanghai index fell as much as 1.7% in the morning after the state-run China Securities Journal reported China's central bank could raise interest rates this weekend ahead of the release of November economic data, which will include consumer price index figures.

China announced an interest rate hike, the first in nearly two years, two days before the release of September's inflation data.

But the benchmark Shanghai Composite Index ended up 0.7% at 2875.86 as metals firms rose following weakness in the U.S. dollar during Asian trading hours.

Analysts in Hong Kong said the report that another China rate increase was imminent was likely a relief for investors, who had been concerned about the timing of any such hike.

Citigroup wrote in a report it expects one rate hike of 25 basis points 'imminently' and total rate rises of 125 basis points by the end of 2011. The house added that China gross domestic product growth would likely remain strong at 9.2% in 2011 while inflation was 'not a major problem' -- good news for Chinese equities in 2011.

Blue chips China Construction Bank, which rose 1.3% to HK$7.06, and China Mobile, which rose 1.0% to HK$78.95, were the biggest contributors to the index's rise, accounting for a combined 37.78 points.

Wharf was the best-performing blue chip, rising 5.8% to HK$58.00 amid a rally in Hong Kong retail firms. A local fund manager said Hong Kong retail stocks 'have become a crowded trade' and that Wharf offers the same exposure but is 'safer' than its retail peers.

BROKERS TIP:----REALGOLD MINING

Event: Gold price reached record high as investors anticipate more quantitative easing policy to come.

Gold futures reached record high last night to US$1,429 per ounce as investors anticipate that the Fed may inject more cash into the market after the release of a disappointing unemployment figure last Friday. At the same time, the worsening European debt crisis also helped push up gold price as some investors are seeking gold assets as a safe haven.

Despite the strong performance of gold price, share price of Real Gold is still trading 7% below the peak of $15.74 on November 9. We believe the recent weakness in share price is a good buying opportunity for long-term investors given its cheap valuation and our bullish outlook on gold.

Real Gold announced a disappointing 3Q10 earnings result, which saw a qoq decline of 3% to RMB 189mn despite a 2% increase in realized gold price. The main shortfall was due to a lower than expected number of production days in August, which in turn affected company’s output and sales volume in 3Q10.

Despite a disappointment in production volume, both average ore grade and recovery rate of the two mines have been stable in 3Q10. Considering that production has returned to normal level in September and also both gold and copper prices are significantly higher in 4Q10 (quarter-to-date gold and copper prices are 10%-11% above their 3Q10 averages), we estimate that company’s earnings in 4Q10 will grow 37% qoq to RMB 258mn, implying a full year net profit of RMB 769mn (EPS RMB 0.92).

While we believe that the output from two existing mines in Inner Mongolia will not have any significant growth going forward, the commencement of Yunnan’s Fuyuan Gold Mine in July 2011 and Jiangxi’s Daping Gold Mine in October 2011 will be the main source of capacity growth over the next two years. We estimate that the two mines combined will boost company’s gold output by 15% from 135koz in 2010 to 155koz in 2011. Production output will have another 37% increment in 2012 when the other two mines in Guangxi become operational.

Gold price has rose 29% year-to-date as investors are losing confidence in fiat money given that Fed has adopted a massive quantitative easing policy in order to stimulate the U.S. economy. We believe the policy will inevitably suppress the US dollar, which in turn is favorable to gold price. As such, we expect gold price to hover at high level in 2011. Our 2011 earnings forecast is based on a relatively conservative gold price assumption of US$1,320.

On the back of strong gold price and a 15% output growth, we estimate that Real Gold will achieve a net profit of RMB 987mn (EPS RMB 1.08) in 2011. Counter is now trading at 11.6x 2011 PER that we think is undemanding given company’s robust output growth and high ore grade of its mines.

We maintain our BUY rating on Real Gold with a 6-month target price of $18.50. This translates into valuation at 15x 2011 PER, which is still a 40% discount compared to valuation of Zhaojin Mining (1818).

BROKERS TIP :- ZHAOJIN GOLD MINING CO

Zhaojin reported a 76% yoy increase in 1H10 earnings, in line with market expectation.

Zhaojin reported net profit of RMB 572.1mn (EPS RMB 0.39) for 1H10, up 76% yoy. Company did not propose any interim dividend. The bottom line was largely in line with our expectation and also represents 52% of market’s full year earnings forecast. The significant boost of earnings was mainly due to an increase in both gold output and gold price as compared to same time last year.

Revenue surged 58% to RMB 1,675.9mn thanks to a 21% increase in volume of gold output from self-owned mines along with a 28% increase in average gold price to RMB 264 per gram. At the same time, integrated cost increased by 16% to RMB 103 per gram. Gross profit margin expanded by 6.8 percentage points to 61%.

Zhaojin did an impressive job in 1H10 by continuing to increase its gold resources via exploration of existing mines as well as acquisition, and has increased its gold resources by approximately 100,215kg (or up 30% from its end-09 figures). During the period, company has acquired gold resources in regions like Xinjiang, Gansu, Guangxi and Liaoning, which is in line with its strategy to expand into areas outside Zhaoyuan.

Company’s self-mined gold output in 1H10 represented around 46% of company’s full year production target. Yet, we believe this was due to slow production during Chinese New Year and are confident that company can achieve its full-year target, implying a 24% yoy growth in gold output this year.

Integrated cost was 7% above our expectation probably due to the higher costs of newly acquired gold mines. However, Zhaojin’s sales price of gold was also 4% higher than the average gold price at Shanghai Gold Exchange in 1H10, as company accurately captured the market trends of gold price during the period.

We maintain our 2010 and 2011 earnings forecast of RMB 1,173mn (EPS RMB 0.80) and RMB 1,415mn (EPS RMB 0.97) respectively, implying a growth of 56% in 2010 and 21% in 2011. Counter is trading at 17x 2011 PER that is not demanding compared to its historical average PER of 21x.

Reiterate BUY with unchanged 6-month target price of $20.90, representing a 19x 2011 PER. We believe gold price will further go up in September as we step into the traditional peak season for physical gold. Thus every correction of gold price this month is a good entry opportunity for Zhaojin.

Given market talks saying that China will adjust interest rate upward in this week as will the two days advance to release the major mainland economic data (now is scheduled on Saturday), investors concerned that Central government might launch new measures again to tighten the economy, selling pressure seen on A share and HK stock market. The HSI once fell below 23,000 and finished the day 336 points lower at 23,093. H share index also lost 186 point to 12,736. Market turnover was HK$77.7bn. China plays generally performed weak. Of which, international oil price retreated which depressed the oil stock. CNOOC (0883.HK) and PetroChina (0857.HK) fell 2.4% and 2.7% respectively. Besides, the concern of the cancellation of auto purchase subsidy continued to hurt auto sector with Brilliance China (1114.HK) lost 6.0%.

Hong Kong stocks opened higher on Thursday, due tpo market concern that China put higher its interest rates, the soft tone of A share triggered Hang Seng index retreated. However, losses were narrowed in the afternoon. Market closed at 23,171, added 79 points. H-share index fell 4 points to 12, 731. Investors remained caution, full day market turnover around HK$70.2bn. Intensive industry competition among 3G market, China Unicom (762) cut its 3G package price to RMB46, seems price war on its way. Telecom players were soft. Policies support sectors remain relatively strong, saw continuous rally on high speed railway counters.

Hong Kong shares ended higher Thursday, led by financial firms following gains on Wall Street overnight, although lingering concerns over possible economic tightening in China capped gains.

The blue-chip Hang Seng Index rose 79.28 points, or 0.34%, to 23,171.80 after trading between 23,083.16 and 23,269.36 during the session.

Market volume totaled HK$70.22 billion, down from HK$77.71 billion Wednesday.

Analysts said although there is uncertainty about further tightening measures in China, the city's benchmark index will likely test 24,500 before the end of this year due to year-end window-dressing activities by fund managers.

Alvin Cheng, associate director of Prudential Brokerage Ltd., said the low trading volume indicates investors are keeping to the sidelines ahead of China's inflation data due over the weekend.

'Investors are taking a wait-and-see attitude. They are worried about a shake-up in the market should a rate hike be announced over the weekend,' Cheng said. 'Besides, everyone is expecting a considerable rate hike this time.'

Castor Pang, research director of Cinda International, said investors' sentiment was hit by concerns over China's longer-term interest rate policy rather than inflation figures for November.

'Everyone has known for some time that strong inflation figures will be coming out from China over the weekend. Whether the figures will be higher or lower than expected will not matter that much,' Pang said, referring to a report published in the state-run Securities Times on Monday, which said China's November inflation likely lagged analysts' expectations.

China said it will issue November CPI data on Saturday instead of the originally planned Monday, fuelling speculation that China could lift interest rates over the weekend.

The state-run Securities Times said in a report Monday that China's November inflation likely rose less than analysts' expectations. The report, which cited unnamed sources, said the pace of December's inflation is likely to slow significantly from November.

The Dow Jones Industrial Average advanced 13.32 points, or 0.12%, to 11,372.48 on Wednesday, as the surge in financial firms more than offset a broad-based decline across the board. Trading sentiment in the Hong Kong market was boosted by gains in U.S.

In Hong Kong, financial firms lead Thursday's gains, tracking peers in the U.S.

Heavyweight HSBC rose 1.0% to HK$80.90, accounting for 35.01 points of the benchmark index's gains.

Standard Chartered advanced 2.8% to HK$228.60 after the London-based lender said Thursday it is on track to achieve another year of record income and profit in 2010, despite narrower net interest margins.

China Unicom ended 3.4% higher at HK$10.92, after its parent company said Wednesday it will this month introduce a cheaper service plan for post-paid third-generation mobile subscribers in China, who could pay as little as CNY46 a month for 3G services.

Bucking the upward trend, Chinese property stocks fell amid expectations of an interest rate hike, and investors were cautious ahead of November inflation data due on Saturday.

Hong Kong shares ended flat Friday as strong trade data from China were offset by a decline in Chinese property developers because of concerns Beijing will tighten monetary policy over the weekend.

The blue-chip Hang Seng Index fell 8.9 points, or 0.04%, to 23,162.91 after falling to an intraday low of 22,965.90 in the morning session. The index is down 0.7% this week. Market volume totaled HK$69.57 billion, slightly down from HK$70.22 billion Thursday.

Analysts said investors were cautious ahead of the release of China's inflation data on Saturday. They said they expect the blue-chip index to trade in a tight range of 22,800 to 23,300 points in the next few sessions as trading activity winds down toward the end of the year.

China's consumer price index is estimated to have risen 4.7% in November, according to the median forecast in a survey of 15 economists, which would be the fastest rise since August 2008. October's CPI rise was a higher-than-expected 4.4%, also a two-year high, fuelling fears the Chinese government may aggressively tighten policy.

'There is speculation of a rate hike by Beijing, but I believe the news has been largely priced in. The recent consolidation is mainly due to profit-taking activities by some investors ahead of the Christmas and New Year holidays after a stronger performance by the bourse over the past few months,' said Derek Mok, a fund manager at Guotai Junan. The Hang Seng Index has risen 9.4% over the past three months.

He said he expects the city's benchmark index to consolidate in the near term.

Concerns over a possible rate hike hurt blue-chip property developers China Overseas Land, which fell 1.2% to HK$15.02, and China Resources Land, down 0.7% at HK$13.76.

Medium-sized developer Country Garden fell 1.0% to HK$3.06.

The Hong Kong market was also dragged lower by Chinese energy firms, with coal producer China Shenhua falling 0.8% to HK$30.30, and oil and gas firm Cnooc retreating 0.3% to HK$18.08.

The Hong Kong dollar's fall against the U.S. dollar for the third consecutive session also weighed.

'Friday's weakness was partly due to a softening of the Hong Kong dollar, led by fund outflows from the equities markets to other asset classes, such as bonds,' said Patrick Yiu, managing director of CASH Asset Management.

Hong Kong shares ended higher Tuesday due mainly to year-end window-dressing by fund managers, but market volume fell to a more than three-month low as investors awaited a U.S. Federal Reserve meeting and the release of key U.S. economic data later in the day.

The blue-chip Hang Seng Index rose 113.58 points, or 0.5%, to 23,431.19 after trading between 23,328.01 and 23,453.42. Market volume totaled HK$57.59 billion, down from HK$63.40 billion Monday, the lowest market volume since Aug. 30.

Analysts said the benchmark index will likely trade in a narrow 23,200-23,500 range in the next few sessions ahead of the holiday season.

'Investors preferred to maintain their holdings after the 14% rise in the benchmark index since the start of September, leading to a short-term decline in trading volume,' said Thomas Chan, a manager director at brokerage Able Alliance.

He added abundant liquidity would continue to support the market in the long run.

Investors are also awaiting cues from the U.S. Federal Open Market Committee meeting scheduled to begin later Tuesday and the release of U.S. November retail sales and PPI data, both due at 1330 GMT, analysts said.

'I don't expect major change from the (U.S.) central bank with respect to its near-term outlook for monetary policy or its second round of quantitative easing,' said Ben Kwong, chief operating officer at KGI Asia.

Chinese coal producer China Coal rose 2.9% to HK$11.98 after it said Monday its November output totaled 10.88 million metric tons, up 40% from a year earlier.

China Shenhua rose 3.8% to HK$31.75 due to expectations it will also post strong sales results. The company will announce November operating figures later this month.

Chinese lenders rose after a China Securities Journal report Tuesday cited unnamed 'authoritative sources' as saying China's new yuan loan quota for 2011 will be the same as this year's target of around CNY7.5 trillion.

Bank of China advanced 1.4% to HK$4.22, ICBC ended 0.9% higher at HK$5.92, and China Construction Bank rose 0.6% to HK7.10.

Bucking the broader market's rise, Hong Kong-based carrier Cathay Pacific fell 0.6% to HK$23.70 after it said Monday it carried 8.7% more passengers in November than it did a year earlier. The result was below October's 14.1% rise and an 18.4% increase in September.

'Cathay may resume strong growth in December, as this is a typical strong season for traveling with the Christmas holidays coming,' said Alvin Cheung, associate director at Prudential.

Hong Kong shares ended lower Wednesday due to renewed concerns about European debt problems after Moody's Investors Service said it might downgrade Spanish government debt.

The blue-chip Hang Seng Index fell 455.84 points, or 2.0%, to 22,975.35 after trading between 22,876.88 and 23,371.34.

Market volume totaled HK$72.45 billion, up from HK$57.59 billion Tuesday.

Analysts said they expect the index to trade in a 22,700-23,500 range until the end of the year as bargain hunting is likely if shares fall much further.

Moody's Investors Service said Wednesday it put Spain's Aa1 local and foreign-currency government bond ratings on review for possible downgrade, citing the country's refinancing needs next year and the strain of recapitalizing its debt-strapped banks.

'The Spain news was the major reason for today's fall,' said KGI Asia associate director Ben Kwong. 'Market sentiment may remain cautious for some time because of concerns about Europe's debt and about further tightening measures from China.'

A strategist at the securities arm of a China-based bank said: 'The (Spain) news triggered some selling pressure in the afternoon, but any further downside is expected to be limited as the direct impact (of a possible downgrade on Spain's rating) on Hong Kong is small.'

Heavyweight HSBC fell 1.4% to HK$80.80, accounting for 50.29 points of the blue-chip index's decline. Other major contributors included China Construction Bank, which declined 2.3% to HK$6.94, and Petrochina, which ended 3.6% lower at HK$9.64.

Cathay Pacific was the worst-performing blue chip, falling 7.2% to HK$22.00.

'The stock might have been hurt by the (International Air Transport Association's) less bullish 2011 outlook for the global airline industry,' said Daiwa analyst Kelvin Lau.

The industry group said Tuesday it expects the airline industry's recovery to pause next year following the strong post-recession rebound in 2010.

Lau added profit-taking after recent gains may also have contributed to Cathay Pacific's fall. The carrier rose to a 52-week high of HK$24.10 last week.

Macau's largest casino operator by revenue SJM Holdings rose 0.8% to HK$12.68 after a disclosure to the Hong Kong Stock Exchange on Tuesday said chairman Stanley Ho had transferred his 7.0% stake in the company to executive director Angela Leong, his fourth wife.

Analysts said the move will help ease uncertainties about the succession plans of Ho, whose health hasn't been good.