Investors had been anticipating the outcome as a signal of developers' confidence in property, which in turn underpins the stock market as a whole. Most attention was focused on a 10,570 square metre residential development site in the up-market Repulse Bay district which was sold for HK$5.5bn (pounds 441m). This works out at about pounds 1,290 per square foot.
The lowest estimate for the sale was HK$4.1bn, while the highest was around HK$6bn.
As the overheated luxury end of the residential property market has seen prices fall by as much as 30 per cent in recent months, yesterday's auction delivered a clear signal that the big-league developers were not losing faith.
After a slow start to the hour-long bidding, two big companies were left in the contest. Eventually Chinahem pulled through, outbidding Cheung Kong, the flagship of the group controlled by Li Ka-shing, who is Hong Kong's most astute property developer. Mr Li's son, Victor, who bid on behalf of the company, described the result as "a vote of confidence" in the Hong Kong market.
Misgivings about the auction earlier in the day prompted investors to place a heavy volume of sell orders, taking the market down 157 points at the morning close. However, as news of the auction seeped out, buyers rushed back, leaving the blue-chip Hang Seng Index to close at 15,534 points, a fall of just 13 points on the day.
James Osborn, director of sales at ING Barings Securities, said the real importance of the auction was that it contained "no nasty shocks". He said the market would have been seriously shaken if bidding had been below expectations but as the three sites on offer had been sold for good prices, the market could breathe easy.
Although there was some evidence of renewed interest in blue chips yesterday, the Hong Kong market has spent most of the past month standing on its head. Retail and mainland Chinese investors have pushed big institutional investors to the side and poured unprecedented sums of money into the market. These punters have shunned blue chips and headed straight for smaller companies, focusing on those with Chinese connections.
As a result, the constituent stocks of the Hang Seng Index have seen their share of trades fall from about 60 per cent of market volume 12 months ago to less than 20 per cent over the past month.
On Tuesday the trade in blue chips slumped to a new low, representing less than 10 per cent of the market volume.
The effect of this new pattern of trading is to make the notoriously volatile Hong Kong market even more volatile as small punters move rapidly in and out of stocks. Institutional buyers have been scared away by some of the crazy valuations now prevailing in the market and are sticking mainly with blue chips which are beginning to look increasingly cheap compared to the rest of the market.