China blue chips end at 18-month high, buoyed by MSCI inclusion

China stocks rose on Friday to end the week higher, on signs tight liquidity is easing and with sentiment lifted by MSCI's decision to include mainland shares in a key index.

The blue-chip CSI300 index settled up 0.9% at 3,622.88 points, the highest close in 18 months, while the Shanghai Composite Index added 0.3% to 3,157.87 points.

For the week, CSI300 jumped 3%, posting the best week in 2017, while the SSEC rose 1.1%.

The US index provider said on Tuesday it would add 222 China-listed stocks, many of them big-cap blue chips, to its Emerging Markets Index (EMI), tracked by around $1.6 trillion, with the inclusion process starting June 2018.

Analysts expected the inclusion to be a significant boost to China's stock market in the long run and pave the way for global capital inflows into China's A-shares.

Tight liquidity conditions have also eased, traders said, with the government recently loosening its tight grip on credit regulations.

The central bank also moved to maintain stability in the financial markets at particular times, including providing funds via open market operations ahead of the mid-year macro-prudential assessment.

On Thursday, shares related to Chinese conglomerates, Dalian Wanda Group and Fosun slumped on news the banking regulator had ordered checks on offshore loans to several acquisitive Chinese firms which have been snapping up assets overseas, including Wanda, Fosun, HNA Group and Zhejiang Luosen.

These shares, including Wanda Film Holding, and Fosun Pharmaceutical stabilised on Friday after the companies said operations were normal, while Chinese lender ICBC said the loan assessment was routine.

For the week, banking and consumers stocks were among the top performing sectors, as they would represent the biggest weightings of China stocks in the MSCI EMI.