(Bloomberg) -- Chinese stocks extended gains in afternoon trade as investors were encouraged by signs of progress in trade talks and strong January credit data.

The benchmark Shanghai Composite Index rose 2.3 percent as of 1:48 p.m. local time and is up 10 percent this year. Shenzhen’s composite gauge advanced 3.1 percent. Both indices headed toward their highest in nearly five months. Hong Kong equities were also strong, with the Hang Seng Index climbing 1.7 percent to 28,374.

The U.S. and China are set to hold further talks in Washington following meetings in Beijing last week that U.S. President Donald Trump described as “very productive” after being briefed by his team on its return. New yuan loans, which expanded to a record in January, also fueled optimism on Chinese stocks.

“The only two things that investors are looking forward to seeing are easing trade tensions between China and the U.S. and a more proactive policy stance at home,” said Shen Zhengyang, a Shanghai-based analyst with Northeast Securities Co. “Now that there are positive signs on their biggest concerns, the market will definitely trend up.”

Brokerages and energy producers were among the best performers, with sector gauges up at least 3.8 percent. Macau casino stocks rebounded from a bruising Friday, when they fell on concerns the Chinese government’s focus on illegal lending would hurt gaming revenue. JPMorgan said that reaction in stocks was perhaps overdone. MGM China Holdings Ltd. led casino gains, rising as much as 6.7 percent, its biggest jump since Dec. 3.

Buying momentum on mainland stocks may look a bit overheated as the 14-day relative strength index on all benchmarks jumped to above 70, a level that signals a security is overbought to some traders. It’s not time to sell China stocks just yet, as the CSI 300 Index has historically shown positive returns surrounding the country’s annual policy meetings in early March, Jefferies Hong Kong Ltd. wrote in a note dated Monday.

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