August 1, 2017 / 8:33 AM / a year ago

China state-owned firms power Hong Kong stocks to 26-month high

Aug 1 (Reuters) - Hong Kong stocks ended at a 26-month high, aided by strong gains in state-backed mainland firms, as investors cheered a private survey showing China’s factory activity accelerated in July.

The benchmark Hang Seng index rose 0.8 percent, to 27,540.23 points, its highest close since June 2015.

The China Enterprises Index, an index tracking major state-owned mainland firms, gained 1.8 percent to finish at 11,024.13 points, a two-year high.

In July, HSI was up 6.1 percent, marking its seventh straight month of gains, while HSCE gained 4.5 percent.

Growth in China’s manufacturing picked up its pace in July, a private survey showed on Tuesday, as output and new orders rose at the fastest pace since February on strong export sales.

Investors also looked to a barrage of economic data around the world to confirm recent signs the global economy is solid, with inflation staying well contained.

Financials led the advance, as investors poured into dual-listed big-cap insurers including New China Life Insurance, a leading life insurance firm in China, which leapt 6.9 percent to its highest since May 2015.

China’s online gaming giant Tencent Holdings ended up 0.3 percent at a record high.

Hong Kong’s rally could be attributed in part to strong southbound inflows via the stock connects linking Hong Kong and the mainland, traders said.

Data showed mainland investors in July spent a total of 42.3 billion yuan ($6.30 billion), the largest monthly amount so far in 2017, buying Hong Kong stocks via the stock connects linking Shanghai, Shenzhen and Hong Kong.

Mainland shares also gained on Tuesday, with China’s blue-chip CSI300 index rising 0.9 percent to finish at its highest close since December 2015. ($1 = 6.7189 Chinese yuan renminbi) (Reporting by the Shanghai Newsroom; Editing by Lisa Twaronite & Shri Navaratnam)

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