All of Asia's markets rallied to an upbeat close on Friday, ahead of next week's Christmas holiday celebrations, with Hong Kong winning back its steep losses for the week.

The Hang Seng leapt 609 points, or 2.26%, to 27,626, as traders showed renewed faith in financials and property stocks like

Hang Seng Bank

(HSNGY)

and

Cheung Kong

(CHEUY)

ahead of 2008. In China, the Shanghai Composite Index rose 58 points, or 1.15%, to 5101, and in Japan, the Nikkei jumped 225 points, or 1.5%, to 15,257, driven up by momentum in tech and exporters.

"Given the very strong performance this year there was progressively more and more caution in the last few weeks, and the recent selloff is still very manageable," says Tahnoon Pasha, head of Asian equities at MFC Global Investment Management in Hong Kong. "It does set a backdrop for positive returns in 2008."

Trading momentum was driven by reported rumors that

Merrill Lynch

( MER) may get as much as $5 billion in cash from Singaporean fund

Temasek

. The deal follows this week's news that

Morgan Stanley

(MS) - Get Report

will receive $5 billion, for a 9.9% stake bought by state-owned

China Investment Corp.

, and other similar foreign cash infusions at the end of this year for

Citigroup

(C) - Get Report

and

UBS

(UBS) - Get Report

.

Hong Kong financials climbed on the news, with

HSBC Holdings

(HBC)

up 0.8%, at HK$132.20, Hang Seng Bank rising 3.9%, to HK$158.60, and

Bank of China

(BACHF)

finishing 0.3% higher, at HK$3.90.

Hong Kong real estate developers also got a boost in Friday's trading, on the back of news that

Sun Hung Kai Properties'

(SUHJY)

Harbour Place, which opened last night, has already sold around 600 of an estimated 1,000 units. Property prices in Hong Kong have surged 20% in 2007, and most analysts forecast growth of 25% next year.

Sun Hung Kai surged 4.23%, to HK$160.20, while Cheung Kong rose 4.5%, to HK$140.60,

Swire Pacific

(SWRAY)

gained 2.8%, to HK$103.30, and

Hang Lung Properties

(HLPPY)

inched 1.8% higher, to HK$33.60.

Hong Kong telecoms were still mixed, however, as

China Unicom

(CHU) - Get Report

surged 4.8%, to HK$16.76, while rival

China Netcom

(CN) - Get Report

dipped 0.9%, to HK$23.10.

China Telecom

(CHA) - Get Report

also fell, by 0.17%, to HK$5.79, but market leader

China Mobile

(CHL) - Get Report

gained 2.2%, to HK$137.80.

Following a similar trend set on Sept. 14, when the

People's Bank of China

last raised interest rates, Shanghai shares shrugged off Thursday's continuation of tightening monetary policy. Among the big-name gainers,

PetroChina

(PTR) - Get Report

locked in 0.13% gains for the day, to 30.54 yuan, after falling as much as 1% in noon trading. The stock is still 37.5% below its debut price of 48 yuan, however, and some market participants see PetroChina as one of the few undervalued stocks in China right now.

Aluminum Corp. of China

(ACH) - Get Report

jumped 3.4%, to 38.98 yuan, while

China Eastern Airlines

(CEA) - Get Report

climbed 2.2%, to 18.73 yuan, despite rumors that national carrier

Air China

(AIRYY)

, which owns a major stake, reportedly rejected a proposed part-sale to

Singapore Airlines

and Temasek.

"There are some wild card outs there which at the moment we are not predicting -- commodities are one of those," says Pasha. "What happens to commodities is something of an uncertain area for us, and will be an uncertain for the market as a whole."

In Japan, a resuming carry trade drove exporters into the green, as the yen lost 0.27, to 113.41 vs. the dollar, according to

Bloomberg

.

Sony

(SNE) - Get Report

, which has held up better than most in the recent slide in Japanese equities, gained 1.2%, to 6110 yen, while

NTT DoCoMo

(DCM)

continued a three-day rally, rising 1.1%, to 184,000 yen.

Among tech shares,

Yahoo Japan

(YAHOF)

was one of the day's best performers, surging 4.6%, to 50,300 yen, after analyst Sato lifted its forecast to "buy," from "hold," on an anticipated increase in advertising-driven earnings, and

Nintendo

(NTDOY)

leapt 3.71%, to 64,200 yen.

In South Korea, the Kospi gained 34 points, or 1.8%, to 1878, as investors cheered the election victory of Lee Myung-bak, and in India, the Bombay sensitive Index rose 70 points, or 0.4%, to 19,162, led higher by other Asian markets.

Like many money managers in Hong Kong and China, MFC Global's Pasha also predicts increased volatility in the Asian markets in the first quarter of 2008, propelled by divergent stances on monetary policy, and companies with strong earnings growth trumping those that cannot keep pace with 2007 performance.

"Growth in 2008 is sustainable, with core earnings growth rising on strong business propositions. Things continue to look very good," says Pasha.

Daniel M. Harrison is a business journalist specialising in European and emerging markets, in particular Asia. He has an MBA from BI, Norway and a blog at

www.theglobalperspective.biz

. He lives in New York.