Hong Kong stocks surge 5.43% to new 7-year high

Shares in Hong Kong powered 5.43 percent higher in early trade on Thursday, adding to the previous day's rally and tracking a recent surge in Chinese markets as mainland investors pile into the city.

The benchmark Hang Seng Index added 1,424.09 points to 27,660.95, breaking the 27,000 mark for the first time since January 2008.

The advance comes a day after the HSI soared 3.80 percent as mainland Chinese investors make use of a link-up between the Hong Kong and Shanghai exchanges that was launched in November.

While the Shanghai-Hong Kong Stock Connect was initially met with scant interest, mainland authorities' decision last month to expand the number of domestic fund-management firms allowed to buy stocks in Hong Kong has seen activity surge.

On Wednesday traders on both sides of the border for the first time used up their daily quota of deals allowed under the scheme.

Shares in Shanghai have surged for more than a year as retail investors have bet -- often using borrowed money -- on authorities loosening monetary policy further to support the world's number two economy.

The central bank has already cut interest rates twice since November, while Premier Li Keqiang last month suggested the government had the weapons to support growth if necessary.

"The catalyst for the rally in Hong Kong was the allowance by the Chinese securities regulators to have Chinese mutual funds be able to invest in Hong Kong listed companies," Mark Matthews, Singapore-based head of Asia research at Bank Julius Baer & Co., told Bloomberg TV.