China H Shares Advance to Cap Biggest Weekly Gain in Four Months

  • Insurers make up more than half of top 10 gainers on measure
  • Vanke continues to rise after rival Evergrande’s investment

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Chinese stocks advanced in Hong Kong, with the benchmark gauge capping its biggest weekly gain since July, as insurers extended a rally amid bets their investment returns will improve.

The Hang Seng China Enterprises Index rose 1.2 percent at the close. The gauge jumped 4.7 percent this week, led by China Life Insurance Co. and New China Life Insurance Co., which both advanced by double digits. China Vanke Co. extended a rally since saying China Evergrande Group lifted its stake in the company. The Hang Seng Index added 0.5 percent on Friday.

Insurers made up more than half of the top 10 gains on the H-share gauge this week. Investors should buy underperforming Chinese insurance stocks because valuations are set to recover as bond yields climb and the nation’s economic outlook improves, Goldman Sachs Group Inc. wrote in a note this week. A weakening yuan has helped insurers post five straight quarters of foreign-exchange gains from overseas investments and operations. The yuan is headed for a third week of declines as the greenback extended its global surge.

“China insurers may continue to be quite strong," said Castor Pang, head of research at Core-Pacific Yamaichi in Hong Kong. “The H-share index may hit 10,000 in the near term, helped by insurance and banking stocks, but after that there should be a very quick pullback. Markets seem to be over-optimistic."

The Hang Seng China Enterprises Index closed at 9,790.23. The Shanghai Composite Index rose 0.6 percent, with its 14-day relative strength index climbing to 73.9, its highest since May 2015 and over a level some traders see as overbought.

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