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China stocks opened higher in Hong Kong due to optimism Europe would recapitize its struggling banks, but a drop on Mainland markets cut into investor gains.

Faiure of European finance ministers to tackle the region's debt crisis was one big factor, along with a rise in Hong Kong mortgage rates and a drop on Mainland markets.

Hong Kong opened lower after Tuesday's sharp rise and retreated further in the early afternoon in line with a drop in Asian and Mainland Chinese markets but gained back some losses before closing.

The blue-chip Hang Seng Index plunged 300 points in the morning before a rally in Mainland markets helped erase most losses by mid-day. However selling pressure emerged in the afternoon.