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China blue chips inch up, post their best week since June

SHANGHAI, Oct 13 (Reuters) - China stocks edged up on Friday, and the blue-chip index posted its best week since late June, helped by the central bank's targeted reserve requirement rate cut.

The blue-chip CSI300 index rose 0.2 percent, to 3,921.00 points, while the Shanghai Composite Index added 0.1 percent to 3,390.52 points.

For the week, the SSEC gained 1.2 percent, while the CSI300 advanced 2.2 percent. Most of the gains were achieved on Monday, when the Chinese market played catch-up with bullish global equities following a week-long holiday.

Bolstering sentiment this week was the central bank's announcement, just before the holiday closure, that next year it will cut the reserve requirement ratio (RRR) for some banks that meet certain requirements for lending to small business and the agricultural sector.

Friday's trading was generally thin as investors anticipated stability in the market ahead of a key party congress next week.

With trade volume dwindling, investors gave a muted response to generally upbeat China September trade data, as well as central bank moves to inject nearly 500 billion yuan ($75.96 billion)into the financial system via one-year loans.

Reflecting the market's relative inactivity, China's volatility gauge - which measures investor expectations of fluctuations in the SSE50 index - has dropped to as low as 10.68 this week, almost touching its lowest since May.

While most analysts expect Chinese stocks to sail smoothly through the party congress, which starts on Oct. 18, as regulators have said maintaining market stability is a major political task, there's concern a sell-off could begin afterward.

Beijing's apparent attention recently to restrict massive share-selling has worked to stabilize the market, but the policy also risks sapping market vibrancy and accumulating the risk of a "stampede", Beijing-based Dongxing Securities wrote in a recent note.

Once the restrictions were lifted, "possible intensified selling could trigger a chain of reactions, causing wild market swings," the brokerage said.

For the week, consumer plays far outperformed the broader market with a 4.9 percent jump as investors chase sector leaders with solid growth, while healthcare stocks also made handsome gains after the country vowed to deepen medical reforms.

However, resources firms languished amid weakness in commodities market, in particular energy stocks, as Beijing vowed efforts to clean the air in the winter. ($1 = 6.5820 Chinese yuan) (Reporting by Luoyan Liu and John Ruwitch; Editing by Richard Borsuk)