Hong Kong stocks went up 326.37 points, or 2.47 percent, to close at 13,554.67 on Friday.

Turnover shrank to HK$36.17 billion ($4.64 billion) from Thursday’s already thin HK$39.64 billion.

Chinese equities edged up 1.04 percent Thursday after the government said it would run the largest budget deficit in the nation’s modern history this year, analysts said.

The benchmark Shanghai Composite Index rose 22.97 points to 2,221.08. The Shenzhen Component Index was up 0.18 percent, or 14.59 points, at 8,242.28. Aggregate turnover surged to 231.1 billion yuan ($33.79 billion) from 195.75 billion yuan Wednesday.

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Gains led losses by 571 to 347 in Shanghai and 473 to 307 in Shenzhen.

Premier Wen Jiabao told the opening of the parliament’s annual session Thursday morning that China would have a 950 billion yuan budget deficit this year, nearly 3 percent of GDP.

The previous record for the deficit was 319.8 billion yuan in 2003, and last year’s deficit was only 180 billion yuan.

Economists said the deficit remained in a safe range, and it might be necessary to spend even more if economic growth weakened further in the second quarter.

Wen also announced 2009 forecasts for GDP and the consumer price index of 8 percent and 4 percent, respectively.

New yuan-denominated loans this year were expected to increase to more than 5 trillion yuan, he said. That figure was taken as favorable news for financial issues.

The top three state-owned commercial banks’ shares rose after the deputy general manager of the China Investment Corp., Wang Jianxi, said that the sovereign wealth fund would buy shares of the banks when necessary. He made the comment to the joint session of China’s top legislative and policy bodies.

Property and non-ferrous metals shares were among other large gainers.

Poly Real Estate Group was up 2.36 percent to 20.38 yuan, while Gemdale Corp. rose 1.23 percent to 9.04 yuan.

Zijin Mining Group, the largest gold producer, saw its shares rise 3.38 percent to 8.87 yuan.

Jiangxi Copper and Yunnan Copper rose by 3.65 percent and 3.35 percent to 17.34 yuan and 14.19 yuan, respectively.

China Development Bank (CDB) signed an agreement with Qinghai province to provide at least 120 billion yuan ($17.65 billion) in loans to the province before 2015.

The funds will be used to support infrastructure projects such as highways, airports, railroads and power facilities, the bank said Monday.

Loans will also go to industrial projects that draw on the province’s local advantages, such as coal and salt lake, and programs involving living standards such as settlement projects and environmental protection, CDB said.

As of December 2008, CDB had lent 60.6 billion yuan to Qinghai province, of which 32.4 billion yuan was still outstanding.

Beijing-based company Sanyuan confirmed on Sunday that Sanyuan Group and one of its subsidiaries would bid in next month’s auction for Sanlu, a Chinese dairy company at the center of the milk contamination scandal.

A member of staff is seen removing Sanlu-brand milk formula products off shelves at a supermarket in Xiangfan, Hubei province in this Sept 12, 2008 file photo. [Agencies]

Wan Qian, secretary for the board of directors of Beijing Sanyuan Foods Co Ltd confirmed the board had agreed that Hebei Sanyuan — a full-asset subsidiary of Sanyuan Foods Co Ltd — and Sanyuan Group would jointly bid in the auction for Sanlu, and the bid offered should not go beyond 110 percent of Sanlu’s total value.

Beijing Sanyuan Foods Co. Ltd, with more than 5,000 people on its payroll, is a Sino-foreign venture which mainly produces dairy products. It also runs outlets of McDonalds and is involved in real estate development, according to a document posted on the company’s website.

The company’s decision was made known late Friday. Related announcements appeared at venues for securities trading across Beijing Saturday.

Beijing Sanyuan Foods decided to pool funds ranging 800 million yuan (about $117.65 million) to one billion yuan through non-public selling shares to Sanyuan Group, Beijing Sanyuan’s parent company, and Beijing Enterprises (Food) Co Ltd, a big share holder, at 4 yuan per share, according to the announcements.

The money raised will be channeled to Hebei Sanyuan for its future business activities, including buying assets of Sanlu. Sanlu was declared bankrupt Thursday by the Intermediate People’s Court of Shijiazhuang, capital city of Hebei Province. Hebei Sanyuan is expected to make up for the remaining financial shortage through measures including bank loans.

Beijing Sanyuan Foods Co Ltd. also announced late Friday it would resume share trading Monday after its shares were suspended from transaction on Sept 25, 2008. The company’s shares closed at 5.59 yuan that day.

Sanlu Group’s assets will be auctioned on March 4 at the Intermediate People’s Court of Shijiazhuang, according to a joint statement by the Hebei Jiahai Auction Co Ltd, Hebei Dongfang Auction Co Ltd and Hebei General Auction Co Ltd.

Sanlu Group’s land use rights, buildings, machines and equipment will be up for bidding.

Assets also include Sanlu Group’s investment rights and interests over three other dairy companies, the joint statement said.

Sanlu Group failed to repay outstanding debts, which surpassed its assets. It met the conditions for bankruptcy, according to the court order.

Sanlu Group has 274 creditors, the largest being Sanlu Business and Trade Company, a wholly-owned subsidiary of the group itself. The other creditors include banks, distributors and suppliers.

On December 19, the Sanlu group borrowed 902 million yuan ($132 million) to pay medical fees of children sickened by baby formula tainted with melamine and to compensate victims, which increased its debt to 1.1 billion yuan.

Sanlu leased its plants to a subsidiary of Beijing Sanyuan Foods Co Ltd in December, days after the bankruptcy petition was accepted by the Shijiazhuang Intermediate People’s Court.

Sanlu stopped production on September 12. Its melamine-tainted baby milk powder was found to have caused the deaths of at least six children and sickened more than 300,000 other children.

Last month, it was fined 49.37 million yuan by the Shijiazhuang court, which also imposed a life sentence for Sanlu chairwoman Tian Wenhua. Tian was convicted of manufacturing and selling fake or substandard products by the Shijiazhuang Intermediate People’s Court and sentenced to life in prison.

Wall Street has turned the clock back to 1997. Investors unable to extinguish their worries about a recession that has no end in sight dumped stocks again Monday. The Dow Jones industrial average tumbled 251 points to its lowest close since Oct. 28, 1997, while the Standard & Poor’s 500 index logged its lowest finish since April 11, 1997.

Louis Spina of Barclays Capital, works at his post on the floor of the New York Stock Exchange Friday, February 20, 2009, in New York. [Agencies]

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All the major indexes slid more than 3 percent. The Dow is just over 100 points from 7,000.

“People left and right are throwing in the towel,” said Keith Springer, president of Capital Financial Advisory Services.

Investors pounded most financial stocks even as government agencies led by the Treasury Department said they would launch a revamped bank rescue program this week. The plan includes the option of increasing government ownership in financial institutions without having to pour more taxpayer money into them.

Although the US government has said it doesn’t want to nationalize banks, many investors are clearly still concerned that this could be a possibility as banks continue to suffer severe losses because of the recession. They’re also worried that banks’ losses will keep escalating as the recession sends more borrowers into default.

“The biggest thing I see here is the incredible pessimism,” Springer said. “The government is doing a lousy job of alleviating fears.”

The Treasury and other agencies issued a statement after The Wall Street Journal reported that Citigroup is in talks for the government to boost its stake in the bank to as much as 40 percent. Analysts said the market, which initially rose on the statement, wanted more details of the government’s plans.

“It’s only a very partial picture of what we may get,” said Quincy Krosby, chief investment strategist at The Hartford. “This proverbial lack of clarity is damaging market psychology.”

Meanwhile, technology stocks fell after The Journal reported that Yahoo Inc.’s new chief executive plans to reorganize the company. But the selling came across the market as pessimism about the recession and its toll on companies deepened.

“There’s no where to hide anymore,” said Jim Herrick, director of equity trading at Baird & Co.

The market’s decline extends massive losses from last week when the major stock indexes tumbled more than 6 percent. The major indexes plunged through the lows they reached in late November, at the height of the credit crisis.

“There’s no main driver of the down day,” said Ryan Detrick, senior technical strategist at Schaeffer’s Investment Research. “There’s just so much skepticism in the overall market and (the question is) is the government doing proper things to get us out of this problem. Obviously the stock market is voting no.”

According to preliminary calculations, the Dow dropped 250.89, or 3.41 percent, to 7,114.78. It last closed this low on Oct. 28, 1997 when it finished at 6,971.32. The Dow hasn’t traded below the 7,000 mark since October 1997.

The Standard & Poor’s 500 index fell 26.72, or 3.47 percent, to 743.33. It was the lowest close since April 11, 1997, when it ended at 737.65.

The technology-laden Nasdaq composite index dropped 53.51, or 3.71 percent, to 1,387.72.

The Russell 2000 index of smaller companies fell 16.38 or 3.99 percent, to 394.58.

Declining issues outnumbered advancers by more than 6 to 1 on the New York Stock Exchange, where volume came to 1.61 billion shares compared with heavy volume of 2.12 billion shares on Friday.

Among tech stocks, Hewlett-Packard Co. fell $1.96, or 6.3 percent, to $29.28, and Intel Corp. dove 70 cents, or 5.5 percent, to $12.08.

Other big decliners included General Electric Co., which dropped to a 14-year low of $8.80, but ended down 53 cents, or 5.7 percent, at $8.85. Aluminum producer Alcoa Inc. tumbled 48 cents, or 7.6 percent, to $5.81.

Some financial stocks managed to gain, including Citigroup, which rose 19 cents, or 9.7 percent, to $2.14, and Bank of America Corp., which gained 12 cents, or 3.2 percent, to $3.91.

Bond prices were mixed. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 2.77 percent from 2.79 percent late Friday. The yield on the three-month T-bill, considered one of the safest investments, rose to 0.28 percent from 0.26 percent Friday.

The dollar was mixed against other major currencies, while gold prices fell.

Light, sweet crude fell $1.59 to settle at $38.44 per barrel on the New York Mercantile Exchange.

Overseas, Britain’s FTSE 100 fell 0.99 percent, Germany’s DAX index fell 1.95 percent, and France’s CAC-40 slipped 0.82 percent. Earlier, Japan’s Nikkei stock average fell 0.54 percent.