China Life Insurance and Industrial & Commercial Bank of China, the latter due to release first-half report within the next week, paced gains among the city’s equites, as investors start to set their eyes on corporate earnings from major companies among the Hang Seng Index constituents. Even after a 25 per cent gain on the benchmark this year, the city’s stocks are still about 20 per cent cheaper than mainland equities.

“Earnings are the main investment theme this year and the market is giving premiums to companies with solid earnings,” said Wu Kan, a fund manager at Shanshan Finance in Shanghai. “We’ll see a moderate increase in first-half earnings and that’ll bring down the valuations and keep the good momentum going on.”

Financial stocks were the biggest gainers on the Hang Seng today. China Life Insurance rose 0.6 per cent to HK$24.

ICBC, China’s biggest bank by assets, gained 2.5 per cent to HK$5.76, highest in two years. Net income for the first six months may have risen 0.9 per cent to 280.8 billion yuan (US$42.1 billion), according to Bloomberg data. The interim report is due next Thursday.

Great Wall Motor gained 0.6 per cent to HK$10.14 after being suspended over the past two days. The automaker said earlier it had not signed any agreement with Fiat Chrysler Automobiles in a statement clarifying media reports.

Kunlun Energy, an oil and gas distributor, tumbled 6.9 per cent to HK$7.02, its steepest decline since January 2016, despite reporting a better than expected first-half profit result. Sanford Bernstein said Kunlun was expected to see lower profitability going forward as part of Beijing’s gas price reform to lower energy costs for users. China International Capital Corp also said Kunlun may need to take a provision for more impairment on its LNG business.

In mainland trading, the Shanghai Composite Index slipped less than 0.5 per cent, or 16.20 points, to 3,271.51. The CSI 300 Index of large companies lost 0.6 per cent.

China United Network Communications retraced sharply by 6.7 per cent to 8.36 yuan, providing the biggest drag on the Shanghai Composite on Thursday. The stocks had surged 20 per cent through Wednesday after resuming trading on Monday following the release of a restructuring plan to sell shares to private investors including Alibaba and Tencent.

Cyclical stocks, or companies who rely on economic strength for profits, advanced after the State Council said yesterday the nation will further reduce idle capacity in thermal coal, aluminium and construction material industries.

Aluminum Corp of China, the nation’s biggest maker of the base metal, gained 0.6 per cent to 7.04 yuan and Anhui Conch Cement added 0.8 per cent to 23.80 yuan.

China Coal Energy erased early gains by as much as 1.1 per cent, ending the day 0.5 per cent lower to 6.21 yuan. The company said yesterday first-half profit jumped 10 fold from a year earlier on improvement in the coal market.