October 4, 2017 / 8:29 AM / 2 months ago

Hong Kong stocks rise as financials surge on China reserve ratio cut

HONG KONG, Oct 4 (Reuters) - Hong Kong stocks ended higher on Wednesday, extending gains made in the previous session with mainland automakers, banks and insurers leading the surge after the Chinese central bank’s weekend move to free up liquidity to support small enterprises.

The blue chip Hang Seng index rose to 28,521.77, its highest since May 2015, but pulled back to end 0.7 percent higher at 28,379.18 points.

The Hong Kong China Enterprises Index climbed 0.8 percent at 11,397.17 after it hit 11,514.82, its highest level since August 2015.

China’s central bank on Saturday cut the amount of cash that some banks must hold as reserves for the first time since February 2016 hoping to encourage more lending to struggling smaller firms.

Analysts said the reduction in the reserve requirement ratio (RRR) should support banks’ net interest margins and profit growth in 2018, while ensuring that liquidity in the broader economy remains ample even if Beijing continues its clampdown on riskier forms of financing.

Bank of America Merrill Lynch said the targeted RRR cut would benefit more banks than before.

ICBC rose 1.8 percent and Bank of Communications gained 0.7 percent. Chinese insurers jumped with New China Life rising 1.9 percent, Ping An Insurance surging 1.3 percent.

Brokers said buying after recent dips helped boost demand for Chinese automaker BYD, which was up 7.7 percent. Geely Auto leapt 4.9 percent to a new high.

Chinese markets are closed all week for a week-long holiday and will resume trade on Oct. 9. Hong Kong will close for holidays on Thursday and will resume on Friday. ($1 = 6.6533 Chinese yuan) (Reporting by Donny Kwok; Editing by Sam Holmes)

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