HK shares gain further as HSBC leads blue chips

(For Shanghai stock market reports, click [.SS])
(Adds Wednesday lunch close, details)

HONG KONG, Feb 13 (Reuters) - Hong Kong stocks rose nearly 2
percent on Wednesday as investors took heart in Wall Street
gains, boosted by Warren Buffet's offer to reinsure $800 billion
in municipal debt risk from the top three bond insurers.

Buffet's offer calmed worries about further fallout from the
credit crisis, helping global lender HSBC Holdings plc (0005.HK)
and other Chinese banks to outperform.

But shares in Hong Kong airline Cathay Pacific Airways
(0293.HK) and its controlling shareholder, Swire Pacific
(0019.HK), slid following a broker downgrade.

Turnover was still thin, indicating a lack of buying
conviction.

"The market is still technically weak," said Andrew To, sales
director at Tai Fook Securities. "If you add the gains of the
last two days, it hasn't been significant. There's still downward
revisions in earnings. The market appears to be entering into a
consolidation zone. The daily range has narrowed significantly."

To said he expected the market to gain between 200 and 400
points on the day.

The benchmark Hang Seng Index .HSI had risen 1.89 percent
to 23,354.78 by lunch. The China Enterprises Index of Hong
Kong-listed mainland companies .HSCE, or H shares, gained 2.66
percent to 13,075.07.

Mainboard turnover was HK$44.8 billion (US$5.7 billion),
compared to Tuesday morning's HK$39.8 billion.

HSBC, the morning's top traded stock, ended the morning up
2.09 percent at HK$112.60.

Chinese lenders, which have been under pressure recently due
to weak sentiment, rebounded. Bank of Communications jumped 3.57
percent to HK$9 and China Construction Bank (0939.HK) shot up
3.51 percent to HK$5.61.

Hong Kong carrier Cathay Pacific slid 1.16 percent to HK$17.
Goldman Sachs downgraded the stock from buy to sell, saying
Cathay's second-half results for fiscal year 2007 may have been
the peak in yield growth. Goldman also said economic uncertainty
and rising competition from Middle Eastern airlines could
undermine Cathay's position.

Goldman also added Cathay to its conviction sell list.

Swire Pacific (0019.HK) fell 0.72 percent to HK$97.05 after
Goldman Sachs put the property-to-aviation conglomerate on its
Conviction Sell list, citing uncertainties at Cathay Pacific in
which Swire is a controlling shareholder.

Wing Lung Bank 0096.HK surged 7.32 percent to HK$95.35
after a newspaper reported the controlling shareholder may sell
the lender to a mainland bank.

The bank said on Wednesday morning it was not in talks
towards a possible sale, calling the report "inaccurate".

In a knock-on effect, other small lenders also rose. Wing
Hang Bank (0302.HK) climbed 3 percent to HK$99.5.

Sino Gold Mining Ltd (1862.HK) jumped 6.91 percent to
HK$54.95 after advising of an increase in the White Mountain Ore
Reserve estimate by 81 percent.
(Reporting by Rita Chang and Donny Kwok; Editing by Anne Marie
Roantree)
(US$1=HK$7.8)