China stocks have best week in 4 years

China's stock market closed out its best week in four years on Friday with a record turnovers.

Rate-sensitive shares including property firms, insurers and brokers continued an upward trend following last Friday's interest rate cut. News on the introduction of the long-awaited deposit insurance scheme pushed up bank shares Friday.

The benchmark Shanghai Composite Index soared 1.99 percent Friday to finish at 2,682.84 points. It continued a 6-day winning streak and closed 7.9 percent higher for the week, the best since mid-October 2010.

The smaller Shenzhen Component Index jumped 1.6 percent to finish at 9,002.23 points. It ended the week with an overall 8 percent gain.

Total turnover on the two bourses expanded to a new high of 710 billion yuan (116 billion US dollars) on Friday from the previous day's trading of 619 billion yuan, thanks to positive market sentiment, new fund inflow into the market, and a large amount of funds returning to the market after unsuccessful subscriptions for new share offers.

China's stock market capitalization overtook Japan as the world's second largest after the United States, data from the two bourses showed after Thursday's close.

Analysts believed that the recent rally was mainly driven by the interest rate cut, which boost market liquidity.

Moreover, many institutions expected a cut in the reserve requirement ratio for some banks soon, which is expected to unleash more funds into the equity market.

Lin Caiyi, chief economist of the Guotai Jun'an Securities, said the Chinese economy now has the fundamentals to support a bull market.

Guotai Jun'an figures showed that 19 out of the 27 sectors that it tracked have seen profit improving, indicating marked progress in eliminating excessive production capacity.

Although growth of China's gross domestic product and industrial added-value continued to slow, the quality of the economy is improving, Lin said.

But analysts warned of risks from new share issuance as hundreds of companies are lining up to be listed. Reform and oversight are important in the new share offering process, they said.

Bank, aviation and petrol-chemical shares were strong on Friday.

Well-informed sources have told Xinhua that China is set to introduce its long-awaited deposit insurance scheme as early as at the beginning of 2015. A deposit insurance scheme is considered a precondition for China to free up deposit rates -- the last and most important step of interest rate liberalization in China.

Bank shares rose across the board. Five banks including China CITIC Bank and Bank of Communications rose by the daily trading limit of 10 percent.

Aviation shares performed well due to a slump in international oil prices. China Eastern Airlines and China Southern Airlines rose by the daily limit of ten percent.

Lower international oil prices are expected to reduce production cost of petrol-chemical companies. China Petroleum and Chemical Corporation (Sinopec), the country's largest oil refiner, jumped 2.08 percent to 5.39 yuan per share.

The ChiNext Index, a NASDAQ-style board of growth enterprises, closed 0.48 percent higher at 1,570.85 points.