Hong Kong shares rose 3.5 percent to a four-week high on Monday on hopes that massive government stimulus spending will reinvigorate China's cooling economy, while 2008's worst performing blue chip Foxconn International boosted its value by a quarter.
Foxconn, the world's largest contract manufacturer of cellphones, vaulted 25.4 percent to a three-month high of HK$3.80 on hopes the Taiwanese handset manufacturer will benefit from the imminent rollout of 3G services in China.
The Hang Seng Index ended 520.50 points higher at 15,563.31.
"Fund managers are buying up all of last year's worst performers on hopes that China will announce another slew of stimulus measures, this time to boost private consumption," said Philip Chan, head of research with CAF Securities.
But some markets watchers expect a pullback as the main index inches towards 15,800 points, with weak economic data in the coming weeks seen limiting gains.
"The U.S. markets are leading Asian markets to a short-term recovery but it's not time to get bullish yet. This rebound is only a short-term phenomenon," said Castor Pang, strategist with Sun Hung Kai Financial.
The China Enterprises Index of top locally listed mainland Chinese firms rose 4.4 percent, tracking a 3.3 percent rally on the Shanghai bourse on its first trading day of the year.
Aluminum Corp of China jumped 9.5 percent on hopes that it would benefit from the Chinese government's infrastructure building plans.
Energy stocks rose sharply for a second day in a row as oil prices continued to edge up after an Iranian military commander called for an oil boycott on Israel amid heightened violence in the Middle East, while a Russian supply row added to geopolitical tensions.
Oil stayed close to $47 a barrel in Asian trade on Monday.
Offshore oil producer CNOOC rose 7.9 percent while Asia's largest oil and gas producer, PetroChina, rallied 6.9 percent.
Bourse operator Hong Kong Exchanges & Clearing (HKEx) jumped 8 percent on hopes of recovering volumes and turnover on the mainboard as investors returned to the market after a long Christmas and New Year holiday.
Turnover slumped to two-year lows in the last few days of December as long stretches of holidays kept investors on the sidelines but recovered to HK$49.4 billion ($6.3 billion) on Monday as compared with HK$30.5 billion on Friday.
Fixed-line operator PCCW fell 4.6 percent after Citigroup cut its rating on the stock to hold from sell following a sharp run-up in the stock since October on buyout hopes.
A rejection of a revised privatisation offer, which was recently raised to HK$4.50 per share from HK$4.20, is expected to signal a 15 percent correction in the stock price, said Citi in a report on Monday.
The stock soared 7.2 percent to HK$3.70 on Dec. 31 after controlling shareholders Richard Li and China Netcom announced the improved takeover offer price. It slipped to HK$3.54 on Monday.
China Mobile, the world's largest wireless carrier, rose 4.7 percent, adding to Friday's 4.4 percent rally after Beijing finally approved the issuance of licences for new mobile networks. (For a related story, click)
Smaller rival China Unicom gained 7.3 percent.
China's Lenovo Group climbed 5 percent after the Chinese magazine Caijing said the world's No.4 personal computer maker was set to announce a major restructuring plan on Jan. 8 including changes of its top management.
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