(Reuters) - Hong Kong and China shares snapped six-day losing streaks on Friday, with gains accelerating in mid-afternoon on speculation Beijing could act to boost confidence following suspected intervention to support the yuan.

Chinese financial, property and resources stocks saw strong gains that helped cut weekly losses on benchmark indices, supported mainly by a bout of short covering ahead of the weekend, traders said.

Better than expected U.S. jobless claims and manufacturing data on Thursday provided some respite for battered global markets. In Hong Kong, this triggered short covering in shares of exporters such as Li & Fung Ltd.

The Hang Seng Index ended Friday up 1.4 percent at 18,285.4 points, while the China Enterprises Index of the top Chinese listings in Hong Kong rose 2 percent. For the week, they lost 1.6 and 2 percent respectively.

Speculation grew on Friday afternoon that China would be announcing another cut in banks' reserve requirements to follow up its Nov. 30 to trim that rate for the first time in nearly three years.

Prior to Friday, both the Hang Seng Index and the Shanghai Composite Index had completely surrendered gains they made after the Nov. 30 cut.

But at the time the markets closed for the day, there was no announcement of a fresh move by Beijing to improve sour investor sentiment.

A market watcher at a top Chinese brokerage said he doubted there would be another cut in reserve requirements because it would take some time before the effects of any fresh cut would show up in the financial system.

The Shanghai Composite Index finished up 2 percent on the day to finish at 2,284.8 points in A-share turnover that accelerated in the last hour of trade. Still, it tumbled 3.9 percent on the week, its sixth straight weekly loss.

The bullish sentiment on Friday benefited shares of New China Life Insurance Co Ltd. It jumped nearly 14 percent on the first day of trading in Shanghai.

Industrial and Commercial Bank of China (ICBC) , the mainland's biggest lender, was among the leading boosts on benchmarks. It gained 1.5 percent in Shanghai and 1.8 percent in Hong Kong.

Chinese property developers, some of which rank among the top beta plays and the most shorted recently in Hong Kong, surged. Evergrande Real Estate Group Ltd jumped 8 percent in strong volume.

China Overseas Land & Investment Ltd, whose forward 12-month earnings multiples ranks among the highest in the Chinese property sector, climbed 5.5 percent. Excluding Friday, short-selling interest in the stock averaged 22.4 percent of its daily turnover this week.


Market watchers have told Reuters that redemption pressures partly accounted for the bearishness in mainland markets this week. During the first four days of the week, the Shanghai Composite lost 6 percent.

The bearishness in Shanghai weighed on Hong Kong markets. Over a 90-day basis, the correlation between the Hang Seng Index and the Shanghai Composite has steadily risen over the last quarter even as the Hang Seng's level of correlation with the S&P 500 has steadily declined in the same period.

This suggests the Hong Kong market could be more supported by mainland markets with global markets likely to stay turbulent in the near future and with Chinese companies accounting for about 60 percent on the Hong Kong bourse.

Both the Hang Seng Index and the Shanghai Composite are down more than 20 percent in 2011, putting them among the worst performing in Asia.

It's quite oversold right now, we could well see a modest rally in Hong Kong in the last two weeks of the year, led by some of the larger caps whose fundamentals are alright but trading at deep discounts, said Mark To, Wing Fung Financial Group's head of research.

Cheung Kong Holdings Ltd is an example of a large cap considered oversold. It gained 3 percent on Friday but remains 25 percent down for the year. It is currently trading at 12-month earning multples that are a 41.5 percent discount to its historical median, according to Thomson Reuters StarMine data.