Shanghai stocks rose 3.1 percent on Friday to their highest level since early May as local markets caught up with a global rally after a week-long National Day holiday with stronger commodities prices bolstering metals and mining issues. The Shanghai Composite Index closed at 2,738.7 points in heavy volume as the benchmark broke through the half-year 125-day moving average, a closely watched indicator.
-- Hang Seng up 2.6, tests two-year peak
-- Turnover of Shanghai A shares surged to a six-month high.
Commodities plays were among the biggest gainers, with Yanzhou Coal Mining Co Ltd, Zijin Mining Group Co Ltd and Jiangxi Copper Co Ltd all reaching their 10 percent trading limits. "Sentiment became quite buoyant today as investors bet on the possibility of more liquidity flowing into the market," said Zheng Weigang, a senior trader at Shanghai Securities.
China is set to announce third-quarter economic data over the next two weeks while the country's nearly 2,000 listed firms will publish quarterly results before the end of this month. Shanghai, one of the world's worst performing bourses, is still down 16 percent so far this year, with China's clampdown on bank lending and property prices having taken a toll despite robust economic growth.
"The door for the market to rise has been opened, but a clear turnaround needs time," said Chen Shaodan, analyst at China Development Bank Securities in Beijing. The Shanghai government issued new rules this week to limit home buyers to one new apartment and will impose a revised land appreciation tax as part of an effort to rein in speculation and soaring home prices.
A strong mainland market spurred gains in Hong Kong as local property plays resumed their stellar run since September after a brief consolidation earlier this week but the benchmark pared gains into the close as HSBC weighed. The benchmark Hang Seng Index, up for the sixth successive week, closed in on a two-year peak, ending up 0.3 percent at 22,944.2. It pulled back from just below its November 2009 high of 23,099.57, which is acting as technical resistance.
The Hang Seng Index's 12 percent rally from the start of September on the back of a strong recovery in turnover has taken it well into overbought territory according to its relative strength index (RSI), now at 80. The last time the RSI was at this level, the HSI was trading near record highs back in September 2007. "Obviously people are being a little more selective now but money is still coming in from institutional investors and if third-quarter results don't disappoint, these levels should hold," said Rafi Mohideen, head of Asian trading at agency brokerage Instinet in Hong Kong.
The heavily-weighted mainland banking and property sectors were garnering interest, said Mohideen. Investors continued to pump money into Hong Kong developers on expectations that an easier US monetary policy will keep money cheap and boost prices of local assets.