ICBC shares lead HK shares to 11-week high

(For Shanghai market reports click on [.SS])

* ICBC hits 11-week high after Goldman extends stake lock-up

* Sinopec extends gains on revised profit outlook

* Li & Fung drops on disappointing earnings (Updates to close)

By Parvathy Ullatil

HONG KONG, March 26 (Reuters) - ICBC notched up its biggest gain in five months, paving the way for a 3.6 percent rally in Hong Kong shares that took them to a 11-week high on Thursday, with other Chinese bank stocks following the strong showing from the country’s top lender.

Shares in Industrial & Commercial Bank of China 1398.HK rose to their highest since early January after its 2008 earnings met expectations and Goldman Sachs extended the lock-up period for most of its in the bank. [ID:nHKG322018]

The benchmark Hang Seng Index .HSI ended 486.87 points higher at 14,108.98 as unexpectedly positive U.S. economic data sparked investor hopes for an economic recovery.

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Mainboard turnover swelled to HK$64 billion, with ICBC alone accounting for HK$5.5 billion of that, from Wednesday’s HK$54.1 billion.

“Every time people try to talk this market down, its seems to pick up again. And now, that more and more people are convinced that the economy may have bottomed out, its not likely the market will fall back to last year’s lows,” said Howard Gorges, vice-chairman at South China Brokerages.

ICBC shares finished 14.8 percent higher at the day’s high of HK$4.11.

Goldman Sachs GS.N agreed not to sell 80 percent of its 4.9 percent stake in the world's biggest bank by market value before April 2010. Previously, it had been permitted to sell half its stake next month and the other half in October.

As of Wednesday, the stock was down 12 percent since the start of the year, trailing a 1 percent increase on the China Enterprises Index .HSCE.

“The new commitment should significantly help alleviate overhang concerns arising from the possible sale by foreign shareholders,” said Morgan Stanley’s Steven Chen, setting a HK$6.10 target price on the stock.

Bank of China 3988.HK extended gains after reporting its earnings earlier this week, rising 7.9 percent on Thursday, while smaller rival China Construction Bank 0939.HK, which is slated to announce it earnings on Friday, rose 7.5 percent.

The China Enterprises Index .HSCE of top mainland firms surged 6.6 percent to 8,489.29 as other banks also outperformed. Bank of Communications 3328.HK tacked on 9.6 percent while China Merchants Bank 3968.HK added 9.2 percent.

China Petroleum & Chemical Corp (Sinopec Corp) 0386.HK jumped 7.5 percent to HK$4.99, building on Wednesday's 5.5 percent rally, riding increased fuel prices in China and a revised profit forecast from the company.

Asia’s top oil refiner said on Wednesday its 2008 net profit will fall by about 50 percent, revising the forecast of a more than 50 percent drop in earnings made in January. The company will announce full-year results on Monday.

Hutchison Whampoa 0013.HK, billionaire Li Ka-shing's ports-to-telecoms flagship, climbed 3.3 percent after it said on Thursday its second-half earnings nearly quadrupled as it trimmed losses at its third-generation mobile services.

Cheung Kong (Holdings) 0001.HK, which owns about half of Hutchison Whampoa, also rose, adding 1.9 percent, despite weak earnings at the property conglomerate.

Li & Fung 0494.HK, a global exporter and distributor, fell 4.7 percent to HK$18.58 after net profit for the second half of 2008 fell 41 percent, lagging forecasts. [ID:nHKG137398]

JPMorgan cut its rating on the stock to “underweight” from “overweight” on the back of disappointing earnings and the nearly 50 percent rally in the stock since the beginning of the year. (Editing by Jan Dahinten)