Hopes that interest rates in the United States have peaked after the Federal Reserve left its funds rate unchanged at 5.25 percent for a second straight time also gave the market a positive tone.

The Hang Seng index advanced 0.61 percent, or 107.01 points, to 17,619.97, after peaking at 17,663.44 - a level last seen in September 2000. Turnover was a brisk HK$37.1 billion, up from HK$33.3 billion Wednesday.

China Merchants Bank is expected to make an explosive start today after drawing massive demand from investors looking to gain exposure to China's roughly 10 percent annual economic growth and further appreciation of the yuan.

"That has got investors excited about the sector," said Alfred Chan, chief dealer at Cheer Pearl Investment, who is expecting the stock to rise as much as 17 percent.

Bank of Communications (3328) added 3.85 percent to HK$5.39, after reaching a record high of HK$5.41, China Construction Bank rose 2.43 percent to HK$3.37 and Bank of China (3988) advanced 1.19 percent to HK$3.39.

Gains in the banks helped drive the China enterprise index up 0.90 percent to a four-month high.

Also in favor, China's largest mobile telecoms firm, China Mobile, (0941) touched a fresh six-year high of HK$55.90, adding to Wednesday's gains after the telco reported robust subscriber numbers for August. The stock closed up 2.59 percent at HK$55.50.

"It's partly the appreciation of the yuan which is helping China stocks and sentiment in the market is pretty good," said Howard Gorges, director at South China Brokerage.

Yue Yuen (0551), the world's largest maker of sports shoes for Nike and other brands, settled at a five-month high of HK$25, up 4.38 percent, a day after the company posted a 17 percent rise in profit for the nine months to June.

Transport shares such as China Eastern (0670) and Cathay Pacific (0293) both rose more than 1 percent thanks to the lower oil price. But oil and gas producer CNOOC (0883) fell 1.69 percent to HK$6.38 - the biggest drag on the Hang Seng.

Oil prices plumbed a fresh six- month low below US$60 (HK$468) a barrel in US trade Wednesday as supply worries continued to be soothed by swelling US fuel stocks. US crude rebounded to late Asian trade. "There could be rebounds in commodity prices, but I think the bear market is coming after such a long bull run," Chan added. Also pressured, SMIC (0981) shares slid 3.81 percent to HK$1.01 after China's largest chip maker posted a loss for the first half of the year.

Li & Fung (0494), a trading company which sells goods to Wal-Mart Stores and Target, climbed 10 cents, or 0.5 percent, to HK$19.02, the highest since its trading debut in July 1992.

Jutal (3303), which provides support services for offshore oil and gas exploration and production firms surged 49 percent on its debut to HK$2.06.

REUTERS, BLOOMBERG