August 26, 2016 / 5:01 AM / 2 years ago

China stocks rise after money exit rumour denied; Hong Kong also up

* SSEC +0.6 pct; CSI300 +0.6 pct; HSI +0.5 pct

* Govt denies rumour that $90 bln of insurance money will exit

* BoCom results ease fears of asset quality woes

SHANGHAI, Aug 26 (Reuters) - China stocks rose on Friday morning, recouping the previous day’s loss, with some traders attributing the improving sentiment to regulators’ denial that insurance money is getting pulled out of the market.

The China Insurance Regulatory Commission (CIRC) late on Thursday denied a market rumour in a local media that 600 billion yuan ($90.17 billion) worth of insurance money would gradually exit the market due to tougher rules.

“The official denial apparently aided market sentiment,” said Wu Kan, head of equity trading at investment firm Shanshan Finance.

“The rumour caused a bit of panic-selling yesterday but now, the market is back.”

The blue-chip CSI300 index rose 0.6 percent, to 3,327.47 points by lunch break, while the Shanghai Composite Index also gained 0.6 percent, to 3,085.74 points.

Small-caps rose sharply, with Shenzhen’s start-up board ChiNext up 1.3 percent.

In a sign of improving risk appetite recently, outstanding margin loans has exceeded 900 billion yuan, hitting a seven-month high.

Banking shares were firm as investors took relief that newly-released earnings by some of country’s biggest lenders didn’t show a sharp deterioration in asset quality as many had feared.

Bank of Communications (BoCom), which reported near flat first-half profit, saw its bad loan ratio also stay stable from the previous quarter.

Brokerage CICC said BoCom could be the first among China’s Big Four state banks to see an improvement in its asset quality.

Disclosure that government-backed funds increased holdings in BoCom by 570 million A shares also helped sentiment.

“It’s true there’s concern that some bad loans at Chinese lenders are not exposed yet, but for China’s yield-hungry investors, banking shares are still regarded as a safe place to put their money,” said Wu of Shanshan Finance.

In Hong Kong, the Hang Seng index added 0.5 percent, to 22,939.17 points, while the Hong Kong China Enterprises Index gained 0.6 percent, to 9,557.61.

Most sectors in Hong Kong rose, led by energy and tech stocks

Editing by Richard Borsuk

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