China’s Stocks Rally Most in Three Years on Support Speculation

China’s stocks jumped the most since October 2009 on speculation state-backed institutions were buying shares as a manufacturing survey added to optimism the world’s second-largest economy will rebound.

The Shanghai Composite Index (SHCOMP) climbed 4.3 percent to 2,150.63 at the close, with trading volumes more the double the 30-day average. A gauge tracking financial companies surged 6.7 percent as brokerages jumped on signs the government will allow more funds to buy equities. Sany Heavy Industry Co. (600031) led a rally by industrial companies after a preliminary reading for a factory output index rose.

“It looks like institutional investors are re-entering the market and they have to increase their stock positions now in order not to miss the boat,” said Dai Ming, a fund manager at Hengsheng Hongding Asset Management Co. in Shanghai, which manages $190 million. “The economy has stabilized.”

The CSI 300 Index (SHSZ300) surged 5.1 percent to 2,355.86, with all 10 industry groups adding more than 2.4 percent. The Hang Seng China Enterprises Index (HSCEI) of Chinese companies traded in Hong Kong rose 1.4 percent to a nine-month high. The IShares FTSE A50 China Index ETF (2823), which mimics the performance of the 50 biggest A share companies, jumped 4.5 percent in Hong Kong.

The Shanghai Composite has advanced 4.3 percent this week, the biggest gain in 13 months and extending last week’s 4.1 percent rally. Shares have rebounded 9.7 percent from an almost four-year low reached on Dec. 3. The gauge is still down 2.2 percent this year, heading for a third straight annual loss.

To contact Bloomberg News staff for this story: Zhang Shidong in Shanghai at szhang5@bloomberg.net

To contact the editor responsible for this story: Darren Boey at dboey@bloomberg.net

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