SHANGHAI: Stocks in China and Hong Kong bounced sharply on Tuesday, as investors snapped up property and bank shares after regulators broadened equity financing channels for developers, easing fears of a debt crisis in the world’s second-biggest economy.

China’s bluechip index CSI300 rose nearly 3% by the lunch break, while the Shanghai Composite Index gained 2.2% to a two-month high. Hong Kong’s stock benchmark Hang Seng shot up nearly 4%.

Tuesday’s euphoria contrasted with pessimism the previous day as the CSI300 gauge dropped as much as 2.7% and Hang Seng ended 1.6% lower amid worries about rare protests against strict COVID-19 curbs in China as infections rise.

Property and banking shares surged, after China’s securities regulator said it would allow China- and Hong Kong-listed Chinese developers to sell additional shares, lifting a six-year-old ban.

The announcement followed government measures to expedite lending and bond financing to China’s struggling real estate sector.

“Deep-pocketed, long-term, and adamant investors are entering the market,” said Mark Dong, Hong Kong-based co-founder of Minority Asset Management.

With listed developers allowed to issue shares, “the market is no longer worried that some property firms would collapse.”

An index tracking China-listed shares jumped 8% to the highest level in six month, while Hong Kong-listed Chinese developers surged more than 9% to a two-month high.

A slew of China-listed developers, including Vanke , Jinke Property and Financial Street jumped to their daily limit of 10%.

China stocks rise on property boost; Hong Kong slips as COVID weighs

In Hong Kong, Country Garden was up 9%, and Longfor Group surged 12%.

The strong market reaction shows the latest measure “is more heartening than previous policies” said Yuejin Yan, head of research at the Shanghai E-house Real Estate Research Institute.

The combination of China’s “three arrows” to aid the property sector - to facilitate lending, bond sales and equity financing - “would greatly improve developers’ liquidity conditions”, he said.

Banking shares also surged, as investors bet a healthier property market would reduce the risk of bad loans.

Financial stocks rose 3.6% in Hong Kong; they jumped nearly 6% in China, on track for their best day in two years.

Hong Kong’s tech stocks also climbed sharply, with an index tracking the sector up 5.5%.