China stocks jump to seven-month high on Shenzhen link optimism

The Shanghai Composite Index rose to 3,133.58, with trading volumes on the gauge surging 75% above the 30-day average

Chinese stocks climbed to a seven-month high on surging turnover as takeover speculation buoyed property developers and shares in Shenzhen rallied after a report said details of a delayed exchange link with Hong Kong will be announced shortly.

The Shanghai Composite Index gained 2.7 per cent as of 1:49 pm. A measure of real estate companies headed for its steepest two-day rally in almost a year after stake purchases by China Evergrande Group fuelled optimism of more mergers. The ChiNext Index rose 3.4 per cent after the Hong Kong Economic Journal said small-cap shares in Shenzhen will be included in the link and the start date may be announced as soon as this week. A gauge of Chinese stocks in Hong Kong advanced for an eighth day.

"The market is expecting the connect will be open shortly," Linus Yip, a strategist at First Shanghai Securities in Hong Kong. "There's much talk about mergers and acquisitions" in the real estate industry, he said.

The China Securities Regulatory Commission is pushing ahead with preparations for the link between Hong Kong and Shenzhen, which expands on an existing connect with Shanghai, and the programme will start this year when appropriate, the regulator's spokesman Deng Ge said at a briefing in Beijing on Friday. Billionaire Hui Ka Yan's Evergrande has boosted stakes in both China Vanke and Langfang Development Co.

The aggregate quota will be abolished for the Hong Kong-Shanghai link, while only daily caps will be imposed on the Shenzhen programme, the Hong Kong Economic Journal reported, citing unidentified funds briefed by exchange officials.

Gains came as China's broadest measure of new credit rose the least in two years. Aggregate financing was 487.9 billion yuan ($73.4 billion) in July, compared with the median estimate of 1 trillion yuan in a Bloomberg survey of economists, data showed Friday after markets closed.

The credit growth data "weren't great, but the market is expecting there will be more policies coming out to help the economy, and that's helping the A-share market as well as Chinese companies in Hong Kong," Yip said.

The Shanghai Composite Index rose to 3,133.58, with trading volumes on the gauge surging 75 per cent above the 30-day average for the time of day.

A measure of property companies jumped 5.3 per cent, taking its rally from Thursday's close to more than 10 per cent.

Vanke and Langfang both soared by the 10 per cent limit on Monday.

Even with the Shanghai Composite rising 4.4 per cent since Thursday's close, the measure ranks among the world's worst performers this year. Shares have been buffeted as the slowest economic expansion in more than two decades weighs on corporate earnings and the memory of 2015's $5 trillion summer rout deters new investors.

The Hang Seng China Enterprises Index added 2 per cent, taking its gains over the eight-day period to 8.5 per cent. The gauge's 14-day relative strength index rose to 76, above the threshold of 70 some traders see as a signal that a rally is about to reverse. The Hang Seng Index increased 0.8 per cent.

AAC Technologies Holdings jumped 3.2 per cent to a record high after Hang Seng Indexes said the company will join Hong Kong's equity benchmark on September 5. Tingyi (Cayman Islands) Holding, due to be removed from the gauge, slumped 4 per cent.