Hong Kong shares close higher on hopes of bigger Fed rate cut

Hong Kong shares closed Wednesday higher in skittish trade as a new raft of weak economic data from the US sparked a range of market reactions from worries about the health of the economy to hopes for a bigger rate cut by the Federal Reserve at its next meeting.

"With all the bad news coming out of the US it is being speculated that the Fed will make a more aggressive 50-basis point cut in interest rate," said Kenny Tang, associate director with Tung Tai Securities. The major US indexes fell overnight to record the worst first five trading days of a new year ever, after the National Association of Realtors said pending home sales fell a greater-than-expected 2.6 percent in November. The data comes after last week's weaker-than-expected December jobs report and slump in manufacturing

The Hang Seng Index closed up 502.95 points or 1.9 percent at 27,615.85, after swinging between 27,625.83 and 26,757.03.

Turnover was the highest so far this year at 120.32 billion Hong Kong dollars.

Chinese stocks led the gains, with banks taking the spotlight on optimism for better-than-estimated earnings growth in 2007. The China Enterprises Index was up 479.75 points or 3.1 percent at 16,139.46.

The mainland's biggest offshore oil producer, CNOOC, jumped 62 cents or 4.7 percent to 13.90 dollars as oil prices rose in Asian trade.

A fresh surge in gold prices also sent shares in gold miners higher. Zijin Mining was up 32 cents or 2.5 percent at 13.10 dollars while Lingbao Gold was up 28 cents or 5 percent at 5.93 dollars.

(1 US dollar = 7.80 Hong Kong dollars)