Banks spearhead rally across the region

Shares in Singapore's leading banks enjoyed some of the region's biggest gains yesterday as encouraging quarterly figures added to hopes that the world's banking system might not need as much capital as forecast.

Banks led a broad rally across Asia, with the FTSE Asia-Pacific index advancing for a third successive session to its highest level since October.

But in Hong Kong, China Construction Bank retreated after reports that Bank of America was considering the sale of an $8bn stake in CCB within days to relieve pressure on its battered balance sheet. BoA will become free to divest about a third of its 16.7 per cent stake today after a lock-in period expires. CCB shares dropped as much as 4.4 per cent, although it narrowed the losses to 0.4 per cent to close at HK$4.75.

The Hang Seng index closed 2.5 per cent higher at 16,660.07, while the main sub-index of mainland companies listed in the territory, or H shares, was 1.5 per cent higher at 9,750.21.

HSBC rose 6.3 per cent to HK$61.60 and its subsidiary Hang Seng Bank gained 10 per cent to close near a four-month high at HK$98.85. Industrial & Commercial Bank of China rose by 2.8 per cent to HK$4.72.

SAIC Motor of China, which owns 51 per cent of Ssangyong shares, refused in February to bail out the company after a big drop in sales of sport utility vehicles in 2008. The sector accounted for more than half of Ssangyong's revenues in previous years.

SAIC shares gained 9.6 per cent to Rmb14.12 in Shanghai – partly on the Ssangyong news, and also on reports that it was planning to sell hybrid and electric vehicles by 2012.

The Shanghai Composite index closed 1 per cent higher at 2,592.52