Hong Kong’s benchmark stock index retreated from a two-year high on Friday, paring a weekly advance on concern recent gains were excessive. The Hang Seng Index dropped 0.1 per cent, or 32.77 points, to 26,030.29 on Friday, trimming the week’s gain to 0.4 per cent. The gauge closed at its highest level since July 2015 a day earlier. The Hang Seng China Enterprises Index of mainland companies trading in the city lost 0.5 per cent, or 57.73 points, to 10,592.17. On the mainland, the Shanghai Composite Index posted its best weekly performance in two months on the strength of large capitalization stocks. “It hasn’t been easy for the Hang Seng to keep up with the 26,000 level, but major investors have been wanting a stable and rising market as the first half of the year is about to come to an end,” said Louis Tse Ming-kwong, managing director of VC Asset Management in Hong Kong. “There hasn’t been a huge deviation from this level in the past week.” The 14-day relative strength index for the Hang Seng Index, measuring the rate at which securities rise or fall in a period of time, stood above 70 over the past 10 trading days. Reading above that level signals to some traders that stocks are overbought and poised to fall. Hong Kong’s stocks are among the best performers in Asia this year, with the Hang Seng Index climbing 18 per cent, as lower valuations lure buying from mainland and global investors. Even after the rally, the city’s equities are 19 per cent less expensive than yuan-denominated stocks in the mainland, according to a measure tracking the price difference of the two markets. Resource companies paced Friday’s decline after official data showed gains in China’s factory-gate prices moderated for a third straight month in May. The producer price index gained 5.5 per cent from a year ago in May, slowing from 6.4 per cent increase a month earlier, the nation’s statistics bureau said on Friday morning. China Shenhua Energy, the nation’s biggest coal producer, slid 0.6 per cent to HK$19.5 and Yanzhou Coal Mining lost 2 per cent to HK$5.99. Cnooc sank 0.3 per cent to HK$8.66. Man Wah Holdings rallied 8.8 per cent to HK$6.56 after the furniture maker rebuffed allegations by short-seller Muddy Waters Capital, which targeted the company and raised questions about its accounting figures. The company said in a Friday exchange filing that the accusations were “groundless”. Man Wah shares soar as sofa maker fights back against Muddy Waters’ short sale Man Wah tumbled 10 per cent on Wednesday before being suspended in the afternoon trading. Tencent Holdings led gains among technology companies, rising 1.5 per cent to HK$277.4. The sector got a boost after e-commerce giant Alibaba, which owns the South China Morning Post , said sales probably increased by as much as 49 per cent for the fiscal year ending March 2018. Its shares jumped 13 per cent in US trading overnight, valuing the company at US$360 billion. The Shanghai Composite Index edged up 0.3 per cent, or 8.07 points, to 3,158.40, the highest close since April 21. The CSI 300 Index gained 0.4 per cent, while the ChiNext index of smaller firms added 0.1 per cent. The Shanghai gauge rose 1.7 per cent this week for the steepest five-day gain since April 7 on optimism policy makers will soften ongoing financial deleveraging. The central bank would have a net injection into the financial system this month after conducting a 498 billion yuan medium-term lending facility on Tuesday, according to Guotai Junan Securities. Insurance stocks led the gains among large companies on Friday. China Pacific Insurance advanced 2.8 per cent to 32.09 yuan in Shanghai, extending its gain to 6.6 per cent this week, while New China Life Insurance added 1.9 per cent to 52.75 yuan, capping a 3.8 per cent weekly advance. Insurers are still under-valued as rising bond yields will boost new investment returns and premium incomes continue to grow fast on increasing demand for health insurance products, according to Haitong Securities.