SHANGHAI • China's stocks yesterday rallied to the highest level in seven weeks and turnover jumped amid speculation that the government will take more steps to bolster economic growth.
The yuan strengthened the most since March, pushed up by a stronger central bank fixing and an advance in equities.
The Shanghai Composite Index climbed 3.3 per cent to 3,287.66 at the close, with trading volumes jumping to a one-month high. The index has advanced 7.7 per cent since financial markets resumed trading last Thursday after a week-long holiday.
Speculation that China's central bank will reduce interest rates or reserve-requirement ratios has increased before data this week that will likely show slowing exports and decelerating inflation.
The People's Bank of China (PBOC) announced over the weekend it will expand a relending trial to nine more cities and provinces, while Premier Li Keqiang said the government will raise fiscal support for shantytown development.
"Given the weakness in the economy, the expectations are quite strong about a cut in interest rates and reserve-requirement ratios," said chief strategist Zhang Haidong at Jinkuang Investment Management in Shanghai, who is adding to his holdings.
The Shanghai gauge has rebounded 12 per cent from the August low as the government targeted support for important industries such as cars and property to bolster growth. This month, China cut the purchase tax on vehicles and the minimum down payment requirements for first-time home-buyers.
Premier Li said the government will also boost tax support for shantytown development, the State Council said on its website on Saturday.
Shanghai, Tianjin, Liaoning, Jiangsu, Hubei, Sichuan, Shaanxi, Beijing and Chongqing will be included in a trial that allows banks to borrow from the PBOC using credit assets as collateral, according to a statement on the central bank's website.
"Investors are worried that the government is not doing enough to meet the 7 per cent growth target," said Mr Bernard Aw, strategist at IG Asia. "News of more stimulus... could go some way to allay those worries."