HONG KONG - Mainland China shares outshined Asia with their best day in a month on Friday, while Hong Kong markets snapped a five-day losing streak, as investors cheered local news reports pointing to increased foreign participation in the A-share market.
Traders said Hong Kong gains accelerated after investors rushed to cover short positions on exchange-traded funds based on the Hang Seng Index at around 21,800, as the index bounced from Thursday's five-month closing low.
The Hang Seng Index closed up 2.3 per cent at 22,013.6, cutting weekly losses to 0.3 per cent. The China Enterprises Index of the top Chinese listings in Hong Kong jumped 3.1 per cent to 10,587.3 on Friday, but still slipped 0.6 per cent this week.
Gains on Friday were their best since Jan. 2, their first in six days and came in bourse turnover that despite being the best since April 5, was still only more than half of the year's heaviest on Feb. 4.
The CSI300 of the leading Shanghai and Shenzhen A-share listings closed up 2.8 per cent on the day and 2.9 per cent on the week at 2,533.8. The Shanghai Composite Index gained 2.1 per cent on Friday and 1.7 per cent this week.
Friday's gains were the best since March 20 for both indexes and elevated them to their highest closing levels since March 27. Shanghai bourse volumes were the best in four weeks, but was still only two-thirds of the year's heaviest on Feb. 4.
"Increased foreign interest will mean more liquidity for the A-share market, this will boost brokerages," said Cao Xuefeng, Chengdu-based head of research for Huaxi Securities.
The brokerage sector surged after the 21st Century Business Herald reported regulators had resumed taking quota applications under the renminbi qualified foreign institutional investor (RQFII) scheme after a two-month suspension, citing Bosera Asset Management.
Reports of discussions between regulators and MSCI index managers on the potential addition of A shares into their emerging market indexes also further buoyed sentiment, in a move that could drive more passive foreign funds into the mainland. China's largest-listed brokerage CITIC Securities spiked 7 per cent in Hong Kong and 5.5 per cent in Shanghai. The smaller Founder Securities soared 8.9 per cent in Shanghai and is now up more than 64 per cent for the year.