Chinese shares rose 1.69 percent on Monday amid hopes for an influx of fresh funds after China lowered the threshold for foreign investment in its capital markets.
Rising turnover and a technical breakout suggested to many traders that the gains would be sustained and that the market might rise further in coming days.
The China Securities Regulatory Commision said on Friday it was lowering to $5 billion from $10 billion the minimum assets that overseas institutions must have under management for the Qualified Foreign Institutional Investor (QFII) scheme.
Foreign investment will continue to occur under a strict quota system, so a sudden inflow of new money is unlikely. But the news was taken as long-term positive for the market.
The benchmark Shanghai composite index closed at 1,650.438 points, the highest level since the end of July.
Turnover in Shanghai A-shares was a moderately active 21.5 billion yuan ($2.7 billion), up from 15.2 billion yuan on Friday. It was the highest turnover so far this month, though still much lower than figures seen during the boom months of June and July.
"Investors' bigger appetite for shares indicates further gains in coming days, triggered by an inflow of fresh funds," said Cao Jianming at Orient Securities.
Technical analysis suggested a target of 1,700 points in coming days. Monday morning's rise confirmed a break above the mid-August highs, triggering a bullish right triangle formed by that level and the line linking the August lows. The measuring objective of the triangle is 1,700.
Market sentiment was also helped by news that the parent of Asia's largest oil refiner, Sinopec Corp, would buy back shares from three state stockholders in a deal worth a reported $1.5 billion. It promised that stockholders would get 2.8 bonus shares for every 10 tradeable shares held. Hong Kong-listed shares in Sinopec, which is suspended from trading in Shanghai, inched up 0.22 percent to HK$4.50 on Monday.
Real estate firms posted hefty gains, amid continued talk that the government has largely completed tightening measures in the sector. China Vanke Co Ltd, the country's biggest property developer, jumped 6.1 percent to 6.79 yuan, extending its gains to 23 percent so far this month.
Shanghai-based Lujiazui Finance & Trade Zone Development Co rallied 3.86 percent to 7.80 yuan, while Poly Real Estate Group Co Ltd closed at 26.40 yuan, up the 10 percent daily limit. Metals were also in the spotlight. Jiangxi Copper Co Ltd, China's top copper producer, jumped 2.76 percent to 10.81 yuan.
China Merchants Bank Co Ltd rose 0.6 percent to 8.42 yuan after the Shanghai Securities News said the bank might price its Hong Kong initial public offer below the HK$8-10 range which the market had expected.
Hong Kong-listed Haier Electronics said on Monday it was buying manufacturing assets from its parent and had discussed the possible transfer of an A-share stake in Shanghai-listed Qingdao Haier Co Ltd, a unit of the group. Qingdao Haier closed 1.15 percent higher at 4.38 yuan.
Wangfujing Department Store (Group) Co Ltd jumped 2.55 percent to 16.11 yuan, its highest level in nearly a month. A group of investors including US private equity fund Warburg Pincus are in talks to buy a stake in the department store chain, sources told Reuters last week.
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