Update | China stocks finish higher as Shanghai, Shenzhen and Hong Kong post gains on week

Mainland Chinese stocks extended their gains for a second day  yesterday in subdued trading and finished up for the second consecutive week, with investors focusing on small-cap companies with big upside potential.

The Shanghai Composite Index of large-cap stocks rose 3.53 per cent to close at 3957.99, lifted by stocks in the national defence, satellite and ship building sectors. The tech-heavy Shenzhen Composite Index jumped 4.98 per cent to finish at 2,190.42, while the Nasdaq-style ChiNext board surged 5.95 per cent to close at 2,783.32.

Turnover in Shanghai and Shenzhen was 1.1 trillion yuan, up from 1.08 trillion yuan on Thursday, with 500 companies halted from trading after reaching the daily upside limit of 10 per cent.

“Investors have returned to the stock markets after dumping their holdings of high-beta names in national defence and cyclical companies [in the recent sell-off],” said Ben Kwong Man-bun, head of research at brokerage KGI. “Chinese markets are consolidating at this juncture with a shift from large-cap stocks into small-cap stocks.”

Shares in PetroChina and Sinopec finished in red, extending their weakness for the second day in a row. Three of the big-four state-owned lenders edged lower, with Agricultural Bank of China being the only exception, unchanged from the previous session.