China: Stocks jump most in two weeks on policy speculation

[SHANGHAI] China's stocks rebounded from the longest stretch of losses since October as financial and energy companies rallied on speculation the government will ease monetary policy. A gauge of small-cap shares jumped to a record.

Financial and energy companies led gains, with China Life Insurance Co soaring 9 per cent and PetroChina Co jumping 4.2 per cent. Industrial & Commercial Bank of China Ltd climbed 2 per cent, snapping a six-day, 11 per cent retreat. Beijing Shiji Information Technology Co spearheaded an advance for technology companies in Shenzhen with a 10 per cent surge.

The Shanghai Composite Index climbed 2.5 per cent to 3,204.91 at the close, halting a five-day, 7.5 per cent loss.

Prospects for monetary easing are growing after Monday's manufacturing data signaled a contraction, according to Dragon Life Insurance Co.

The central bank injected 90 billion yuan (US$14.4 billion) into the money markets to avoid a cash crunch amid new share offerings and ahead of Chinese New Year holidays.

"There's speculation about a reserve-requirement ratio cut," said Wu Kan, fund manager at Dragon Life in Shanghai. "Though it's not confirmed, the speculation is driving the market to some extent."

The CSI 300 advanced 2.5 per cent. Hong Kong's Hang Seng China Enterprises Index added 1.3 per cent at 3:42pm, while the Hang Seng Index rose 0.2 per cent. The Bloomberg China-US Equity Index, the measure of the most-traded US-listed Chinese companies, climbed 1.7 per cent on Monday.

BLOOMBERG