HONG KONG (Thomson Financial) - Hong Kong shares ended the morning session higher on Friday as investors picked up large caps

like Cheung Kong (Holdings) Ltd. and PetroChina Co Ltd. on hopes of upbeat corporate earnings despite the global economic uncertainty.

Cheung Kong gained after Citigroup raised its target price and the stock remained on the 'buy'

list of several brokers, while PetroChina advanced on reports the Chinese government plans to relax rules over the collection of windfall taxes.

'Selective buying of stocks with strong fundamentals is supporting the market,' said Castor Pang, investment strategist at Sun Hung Kai Financial.

The Hang Seng index was up 161.80 points or 0.6 percent at 25,675.51. Turnover was HK$46.6

billion.

But caution ahead of the release of key U.S. economic data capped gains. Due out next week include U.S. producer prices for April and the National Association of Realtors' existing home sales.

'The market is unable to shake off worries about the U.S. economy and the uncertainties in the financial markets. This is the reason resistance is strong around the current level,' said Pang.

The Hang Seng Index will continue to trade within a narrow range between 25,000 and 25,800,

he said.

Asia's largest oil company PetroChina rose nearly 4 percent to HK$11.56. The official Xinhua

news agency quoted PetroChina Chairman Jiang Jiemin as saying that the government plans to

raise the threshold for windfall taxes charged on domestic crude production.

Since March 2006 the Chinese government has collected a windfall tax of 20 to 40 percent on the portion of crude revenue above $40 per barrel. When the crude oil price passes $60, the levy is 40 percent.

Jiang would prefer a threshold of $80, but he did not say what level the government plans to set.

Cheung Kong rose 3.4 percent to HK$128.50 after Hutchison Whampoa Ltd. extended gains.

Hutchison Whampoa added 0.4 percent to HK$83.65, extending Thursday's 5.5 percent rise

after brokers upgraded the stock to 'buy' from 'neutral'.

Bank of East Asia rose 1.8 percent to HK$46.50, adding to a 3.4-percent jump in the previous session. Goldman Sachs upgraded Bank of East Asia to 'buy' from 'neutral', citing the lender's upbeat earnings outlook.

China Construction Bank, one of the mainland's biggest lenders, fell 2.4 percent to HK$7.06 on

a report that an unidentified institutional investor is selling shares worth up to HK$2.9 billion ($371.8 million).

Analysts are speculating that Singapore's Temasek Holdings, which owns 5.99 percent of the

bank, could be the seller, the South China Morning Post reported.

PICC Property&Casualty slipped 1.0 percent to HK$6.94 on reports its life insurer affiliate, PICC Life, may pay at least 13.26 billion yuan in claims from devastated areas in Sichuan province.

The state media did not give details about the claims received by PICC Property, the nation's largest non-life insurer. But the company is likely to be hit by claims over commercial buildings and property, said analysts.

Sun Hung Kai Property Ltd, the city's largest property developer, lost 1.4 percent to HK$134.20 as investors worry about an ongoing crisis at the company's management.

Walter Kwok obtained an interim injunction to block a vote by directors to terminate him as chairman and chief executive of the company after failing to reconcile with family representatives ahead of the board meeting scheduled Thursday.

A hearing on the case will be held on May 23. Kwok is currently on leave of absence.

Hunan Nonferrous Metals, the mainland's largest zinc and tungsten producer, soared 15.3 percent to HK$3.31 when it resumed trading after the company announced it agreed to raise its stake in Australian minerals explorer Abra Mining to 75 percent from 17.8 percent currently. The deal is worth A$67.4 million.

The Changsha-based metal producer offered A$0.83 a share for shares it does not own. The company said it is not ruling out taking over Abra Mining.

Other mining stocks surged. Zijing Mining jumped 4.3 percent to HK$7.04 and Lingbao Gold was up 0.8 percent at HK$3.72 as gold prices rose overnight.

($1 = HK$7.80)

leonora.walet@thomsonreuters.com

lw/ms

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