HONG KONG, April 19 (Reuters) - China shares were set for their best day in a month on Friday, lifting Hong Kong markets from a five-day losing streak, as investors cheered local news reports pointing to increased foreign interest in the A-share market.
The brokerage sector led gains after the 21st Century Business Herald, citing Bosera Asset Management, said regulators had resumed taking quota applications under the renminbi qualified foreign institutional investor (RQFII) scheme after a suspension in February and March.
Reports that the China Securities Regulatory Commission and the State Administration of Foreign Exchange met with MSCI index managers to discuss the potential addition of A shares into MSCI emerging market indexes, further buoyed sentiment.
At midday, the Hang Seng Index was up 1 percent at 21,736.1, while the China Enterprises Index of the top Chinese listings in Hong Kong climbed 1.9 percent. Both are set for their first gain in six days, but are still down 1.6 and 1.8 percent on the week, respectively.
The CSI300 of the leading Shanghai and Shenzhen A-share listings gained 1.7 percent, while the Shanghai Composite Index rose 1.4 percent. Both are set for their best daily showing since March 20 and are up 1.8 and 0.9 percent on the week.
Gains on Friday helped the Hang Seng and Shanghai Composite indexes bounce further from their respective 200-day moving averages, a technical level they had tested at least once earlier this week.
"Increased foreign interest will mean more liquidity for the A-share market, this will boost brokerages," said Cao Xuefeng, Chengdu-based head of research for Huaxi Securities.
"Foreigners also tend to prefer the mid-sized banks with potential to tap the growing credit needs of private enterprises," Cao added.
On Friday, Citic Securities climbed 3.5 percent in Shanghai and 5.6 percent in Hong Kong. The smaller Founder Securities jumped 7.4 percent in Shanghai and is now up almost 62 percent for the year.
Citic was further boosted by an upgrade by UBS analysts from "sell" to "neutral", anticipating China's largest listed brokerage will gain market share at the expense of smaller ones and strong growth in its margin financing business.
BOUNCING OFF LOWS
Commodities-related sectors rebounded from multi-month lows following a mild rebound in the physical commodity markets. China's biggest gold miner Zijin Mining rose 0.9 percent in Hong Kong and 1.6 percent in Shanghai.
Zijin's Hong Kong shares had on Thursday closed at their lowest since October 2011. It is still down 10.4 percent this week, set for its worst weekly showing in almost a year.
Shares of Lenovo Group spiked 5.6 percent from Thursday's 5-1/2-month closing low after the company said it was in preliminary talks about a potential acquisition.
This followed a media report that IBM Corp was negotiating the sale of its x86 server hardware business to the Chinese computer maker.
The Chinese banking sector was also a standout outperformer at the end of a week littered with headlines about regulations on the proliferation of wealth management products, local government debt and money laundering.
Part of the problem, traders said, stems from the fact there is a lack of consensus among China's various policy makers, chiefly its central bank and its banking, securities and insurance regulators.
Industrial and Commercial Bank of China (ICBC) jumped 3 percent on the day, cutting weekly losses to 0.8 percent in Hong Kong. Its Shanghai listing rose 0.5 percent.
Mid-sized lender China Minsheng Bank soared 4.2 percent in Shanghai and 2.8 percent in Hong Kong.
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