Regional stocks rallied yesterday as investors were cheered by signs of a recovery in mainland manufacturing and the chance of more investment across the Taiwan Strait. Nineteen of 20 markets across the Asia Pacific rose, led by India with 6.41 per cent, Singapore 5.65 per cent and Hong Kong 5.54 per cent. Taiwan rose for a third day, climbing 5.64 per cent to close above 6,000 points, the first time since September last year. The rally in the region was spurred by two separate purchasing manager's indices showing manufacturing in the world's third-largest economy may be on the mend after being roiled by the global financial crisis in the past six months. Such indices are being closely watched as they signal rising demand for goods and services. 'China's PMI is definitely leading the market to refocus on export growth,' said Khiem Do, a strategist at Baring Asset Management. Investors are now switching their money to Asia in the belief that some markets in the region including Hong Kong and Taiwan offer better returns with lower political risk, according to Patrick Yiu Ho-yin, a managing director at CASH Asset Management. The CLSA China Purchasing Manager's Index released yesterday showed an increase to a seasonally adjusted 50.1 last month from 44.8 in March. It is the first time since August last year that the index has risen above 50, a threshold that indicates whether manufacturing is contracting or expanding. A separate index last week commissioned by the National Bureau of Statistics edged up 1.1 points to 53.3 last month. 'The business surveys all showed improvement in April, adding support' to our view that a recovery had started, Barclays Capital said in a report. The bullish sentiment towards the mainland extended across the Taiwan Strait as investors hoped the first investment by a mainland state-owned company on the island will augur further deals. China Mobile and Far EasTone Telecommunications sealed a HK$4.08 billion deal last week, allowing the mainland's largest mobile operator to take a 12 per cent stake in the Taiwan carrier in the first direct investment in the island by a mainland state-owned enterprise since 1949. Taiwan stocks trading in Hong Kong rallied yesterday on speculation there will be more acquisitions by mainland companies. Foxconn International Holdings, the world's biggest contract mobile handset maker, surged as much as 19.67 per cent before closing with a gain of 17.81 per cent at HK$5.69. 'The strong rebound in the stocks is a surprise,' said Macquarie analyst Lu Chia-lin. 'We believe it was triggered by the positive sentiment surrounding the Taiwanese equity market, rather than anything related to the company's business.' Fubon Bank (Hong Kong), controlled by Taiwan's Fubon Financial Holding, rose 12.03 per cent while Taiwan cement manufacturer TCC International Holdings soared 26.24 per cent. Goldman Sachs upgraded Taiwan stocks to 'overweight' and expects the Weighted Index to rise to at least 7,500 points by the end of the year. 'The rapidity and scope of recent cross-strait initiatives are welcome signals that Taiwan may finally reap the economic benefits from a warmer relationship with China,' the Goldman report said. Analysts said China Mobile's move was a sign of new sources of liquidity with the potential for mainland money to flow to the island. 'We see this as an important inflection point for Taiwan as this sets a precedent for Chinese money to come into Taiwan,' said William Dong, an analyst at UBS.