6:00AM New York, 6:00PM Hong Kong – HK stoks recover led by financials; China’s consumer price index falls in the second quarter.

Hong Kong stocks recovered led by financial stocks after Federal Reserve Chairman said in a speech yesterday that the bank has signed a memorandum of understanding with the Securities and Exchange Commission to strengthen the surveillance of investment banks.

However, the advance was trimmed by news that Iran has test-fired missiles.

Market Sentiment

In Hong Kong trading Hang Seng Index increased 2.76% or 585.00 at 21,805.81, and the China Enterprises Index of Hong Kong listed mainland stocks, or H shares, advanced 4.79% or 540.99 at 11,834.31, In Shanghai trading CSI 300 Index gained 3.90% or 113.28 at 3,015.13.

Daily turnover on main-board was HK$74.55 billion compared with HK$63.74 billion yesterday.

China’s CPI Falls Q2

Xinhua News Agency reported on its Web site that statistics from the National Bureau of Statistics show that China’s consumer price index declined 0.7 percentage points to 94.1 in the second quarter from the previous three months.

The index also fell 2.7 percentage points from the comparable quarter a year earlier.

According to the report, China''s business climate index fell 8.6 points to 137.4 points from last year''s second quarter, while the entrepreneurial confidence index declined 8.3 points to 134.8 from a year ago.

Communications Co and Royal Vopak to Invest Rmb7 billion

China Daily Online reported today on its Web site that Communications Co - a subsidiary of State Development and Investment Corporation - and Royal Vopak from Netherlands will inject Rmb7 billion on a commercial oil reserve project in Hainan.

The project will involve the construction of a public oil terminal containing two 300,000-ton berths, two 100,000-ton berths and two 50,000-ton berths for crude and oil products and a commercial oil storage base covering an area of 500 million square meters.

Experts believe that deal will positively impact on industries such as oil refineries, while the joint-venture commercial storage facility in Yangpu will help ensure a stable supply of crude oil for further processing.

Gainers & Losers

Financial stocks increased on news that banks were oversold and after bullish profit estimates from lenders.

Comments by Federal Reserve Chairman Ben Bernanke that the Securities and Exchange Commission and the bank have signed a memorandum of understanding to heighten supervision of investment banks also impacted on stocks. ICBC increased 5.1%, China Construction Bank advanced 4.9% and China Merchants Bank soared 5.4%.

HSBC Holdings jumped 2.9% and China Life surged 6%.

Airlines also increased on easing crude oil prices. However gains were trimmed after oil prices increased in afternoon trade as Iran test fired missiles. Cathay Pacific edged up 4.9%, Air China spiked 5.4%, China Southern Airlines climbed 5.9% and China Eastern advanced 5%.

China Overseas Land & Investment rose 10% on speculation the China will reconsider its credit tightening moves.