HK shares up on Bank of China, HSBC, but volume thin

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

By Rita Chang

HONG KONG, Feb 19 (Reuters) - Hong Kong stocks rose on
Tuesday, tracking strong Asian markets, as Bank of China
(3988.HK: Quote, Profile, Research, Stock Buzz) surged after its chairman said the bank had set aside
enough provisions to cover its exposure to subprime credit.

Bank of China chairman Xiao Gang also said the Chinese lender
would report "marked" profit growth for 2007.

"People are thinking the write-off for subprime will be less
than expected," said Y.K. Chan, strategist at Phillip Securities.
"People are buying shares gradually, even though we had a
sell-off yesterday."

Investors were not put off by China's report that its annual
consumer price inflation surged to 7.1 percent in January, the
highest level in more than 11 years [ID:nBJB000026]. The number
met expectations as fierce winter weather and the timing of the
Lunar New Year this year accelerated inflation, Xinhua said.

But mainboard turnover was thin at HK$42.0 billion (US$5.4
billion), compared to Monday morning's HK$47.1 billion,
indicating many investors were sitting out.

The benchmark Hang Seng Index .HSI had risen 2.2 percent to
24,276.36 by lunch. The China Enterprises Index of Hong
Kong-listed mainland companies .HSCE, or H shares, gained
nearly 3 percent to 14,025.38.

Bank of China was the morning's most active stock, up 7.8
percent at HK$3.3, boosting other mainland financial shares.

Industrial and Commercial Bank of China Ltd (1398.HK: Quote, Profile, Research, Stock Buzz), the
morning's second-most active stock, vaulted 4 percent to HK$5.41
after saying on Monday its non-performing loan ratio had dropped
further in 2007 thanks to enhanced risk controls [ID:nPEK353243].

China Construction Bank (0939.HK: Quote, Profile, Research, Stock Buzz) rose 3.8 percent to
HK$5.96. China Life (2628.HK: Quote, Profile, Research, Stock Buzz) advanced 2.8 percent to HK$31.15.

British lender HSBC Holdings plc (0005.HK: Quote, Profile, Research, Stock Buzz) tracked its
London-listed shares (HSBA.L: Quote, Profile, Research, Stock Buzz) higher to climb 2.1 percent to
HK$115 after declining sharply for two straight days. Banks led
London's FTSE 100 on hopes of higher dividends and after the
government decided to nationalise stricken lender Northern Rock
NRK.L.

Most mainland telecom plays gained on speculation that China
will soon announce an industry reshuffle.

China Telecom (0728.HK: Quote, Profile, Research, Stock Buzz), the country's top fixed line
provider, leapt nearly 3 percent to HK$6.44. China Mobile
(0941.HK: Quote, Profile, Research, Stock Buzz), the country's top cellular phone operator, gained 1.8
percent to HK$120.10.

Sun Hung Kai Properties (0016.HK: Quote, Profile, Research, Stock Buzz) edged up 1.2 percent to
HK$141. The city's top developer said its chairman and chief
executive Walter Kwok would take temporary leave immediately.
[ID:nHKG290199]
(US$1=HK$7.8)
(Editing by Anne Marie Roantree)