October 4, 2017 / 5:11 AM / 2 months ago

Hong Kong stocks surge as banks, insurers lead

* HSI +0.76 pct, HSCE +0.97 pct

* Chinese banks extend gains as central bank cut cash reserve rate

* HSCE hits over two-years high as banks, insurers climb

HONG KONG, Oct 4 (Reuters) - Hong Kong stocks rose on Wednesday, extending gains made in the previous trading session, with Chinese banks and insurers leading the surge after China’s central bank cut reserve ratios over the weekend.

The blue chip Hang Seng index rose to 28,521.77, its highest since May 2015, but pulled back to 28,386.32 points by the lunch break, still up 0.76 percent.

The Hong Kong China Enterprises Index climbed 0.97 percent at 11,414.92 at midday after it hit 11,514.82, the highest since Augist 2015.

“The momentum that carried forward from the previous trading session gave the market a further boost,” said Alex Wong, a director at Ample Finance Group. “Players acted sensibly and calmly this morning after the momentum caught them by surprise previously.”

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 and energize its lacklustre private sector.

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 will remain ample even if Beijing continues its clampdown on riskier forms of financing.

Bank of America Merrill Lynch said the targeted RRR cut was aimed to provide more support to micro and small enterprises, and would benefit more banks than before.

ICBC rose as much as 3.5 percent to HK$6.48, the highest since June 2015, before paring gains to HK$6.34, still up 1.3 percent.

Bank of Communications climbed 1.4 percent, China Construction Bank rose 0.6 percent and Bank of China gained 0.5 percent.

Chinese insurers also rose with New China Life rising 2 percent, Ping An Insurance surging 1.5 percent, and China Life up 1.3 percent.

Chinese automakers also jumped with Geely Auto rising 3.9 percent to a record high, while BYD Company leapt 6.4 percent heading for the biggest daily percentage gain since Sept. 26.

Chinese markets will be shut all this week for the holiday and will not resume trade until Oct. 9. Hong Kong will close for holidays on Thursday. ($1 = 6.6533 Chinese yuan renminbi) (Reporting by Donny Kwok; Editing by)

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