Hong Kong and China shares rose on Friday, bolstered by Chinese banks and developers after Beijing's banking regulator said the country's Big Four state-backed banks will lend more to qualified developers to boost the supply of non-luxury housing.
The Shanghai Composite Index finished up 1.4 percent at 2,460.7, its highest close since Nov. 17. It rose 0.9 percent this week, taking its winning streak to seven weeks.
On Friday, the China Enterprises Index of the top mainland listings in Hong Kong rose 1.2 percent, while the broader Hang Seng Index gained 0.8 percent. This week, they gained 0.4 and 0.7 percent, respectively.
The statement on home-lending came a day after prices of banking and property shares tumbled on fears of capital-raising. Friday's reversal underscored the extent to which Chinese stocks are supported by policy, especially with the annual meeting of the National People's Congress (NPC), China's legislature, starting next week.
Friday's announcement in a newspaper run by the Chinese central bank sends a clear signal that the big banks, which account for about 40 percent of loans in China, are ready to ratchet up real estate lending.
It said lending should support building of ordinary homes, implying projects should be affordable for many citizens.
A-share turnover in Shanghai rose above its 20-day average for the first time in three sessions on Friday, but turnover on the Hong Kong main board neared a three-week low.
The Hang Seng Index finished at 21,562.3, still shy of 21,725.6, the top of a gap that opened up between Aug. 4 and 5, which it tested on Feb. 20 and has served as chart resistance for more than two weeks.
We have been stuck in a range on the Hang Seng Index for a while now, but it looks like we could break out on the upside soon with earnings, the NPC meetings, and data due next week that should provide support, said Larry Jiang, chief investment strategist at Guotai Junan International Securities.
On Friday, traders also cited chatter that some Chinese People's Political Consultative Conference (CPPCC) members submitted proposals to ease property policies ahead of the meeting starting on Saturday.
One such proposal suggested 30 percent discount on mortgage rate for first-time homebuyers. The NPC follows on Monday, which will be eyed for any policy support that could boost demand.
Chinese brokerages are also lobbying the government to allow them to launch buyout funds and make alternative investments as the country's securities regulator plans to reinvigorate the struggling sector.
In Hong Kong on Friday, Yuexiu Property Co Ltd, a small-cap Guangzhou-focused Chinese developer, surged 12.6 percent in more than 10 times its 30-day average volume after reporting a strong profit after trading ended on Thursday.
Country Garden Holdings Co Ltd rose 4.1 percent to HK$3.33, slightly above chart resistance seen at HK$3.29, the low end of the gap that opened up following its 9 percent loss on Thursday after it announced a placement of new shares.
Moody's said on Friday that its rating on the developer, China's fifth-largest by sales value, remained intact despite the share placement. On Tuesday, Country Garden posted earnings for 2011 that beat expectations.
In Shanghai, developers were standout outperformers, with a gauge of the sector jumping 3.8 percent. Poly Real Estate (Group) Co Ltd and Shenzhen-listed China Vanke Co Ltd each rose about 4 percent.
EARNINGS, DATA, POLICY IN FOCUS NEXT WEEK
Along with the CPPCC and NPC meetings next week, corporate earnings and February data could give fresh clues to the state of the slowdown in the world's second-largest economy.
Beijing is scheduled to post a slew of data over the next week, including inflation, retail sales and industrial output on March 9 and trade on March 10. Money supply and loan growth are due between March 10 and 15.
Sun Art Retail Co Ltd, among the biggest hypermart operators in the mainland, gained 2.9 percent ahead of its 2011 earnings expected over the weekend. Its peer in the China consumer space, Want Want China Holdings Ltd, is expected to report results on Tuesday.
Chinese banks were strong on the policy support announced by the bank regulator on Friday, with China Construction Bank Corp up 1.2 percent and among the top boosts on the Hang Seng Index.
From mid-March, Chinese banks are expected to post earnings. In a note to clients dated March 1, Barclays analysts said they expect the sector to report strong earnings growth driven by increases in fee income and net interest income.
However, we expect increasing concern about slower-than-expected loan demand and profit growth in financial year 2012, the analysts said in the same note, adding they have now moved from bullish to neutral on China banks with most of the policy fine-tuning positives priced in.
The mainland's biggest lender, Industrial and Commercial Bank of China Ltd , among Barclays' top picks, gained 0.7 percent in Hong Kong on Friday. The stock, which shed 8 percent in 2010 and another 20 percent last year, has gained 22 percent this year.