"There is excitement over a possible interest rate cut," said Sunny Chan, research head at Seapower Securities, adding the market had also been buoyed by improved sentiment in the property sector. The key Hang Seng index gained 148.14 points to close at 9,927.05, breaching the 9,996.85 level it touched on May 5. The value of turnover amounted to 6.026 billion Hong Kong dollars ($ 779 million), against the previous day's 5.25 billion dollars. The market will be closed on Wednesday for a public holiday.

Howard Gorges, vice president of South China Brokerage, cautioned that hopes of another interest-rate cut following this month's 50-basis point reduction may be premature. "There are expectations that the rate will come down but not in the short term,"he said. "The market has consolidated in a narrow range,with no selling pressure."

After losing 38.84 points in the previous day's trade, the market opened strongly with the key barometer gaining 150.87 points by the end of the morning session. Dealers said buying was mostly concentrated in property and China-related stocks on the wide interest-rate cut expectations.

China's commercial banks lowered interest rates on foreign currency deposits and loans on Tuesday for the third time in four months following a central bank directive designed to shore up the yuan.

Dealers said property issues had traded higher on the local stock exchange, outperforming the broader market, amid a benign interest rate trend and strong response to several property sales.

They said it was difficult to tell whether property prices had hit bottom, but it was likely that the government would try to prevent property prices from falling further.

"The property market is turning active with increased property transactions, this is a good sign ... There was an obvious change insentiment towards property stocks. People are buying them with expectations that they will be outperformers in the market," said a research analyst.