China’s stock index jumps 2 per cent on optimism regulators will enact looser rules on financial products

China’s stocks rose for the first time in six days, led by financial companies, on expectations that policymakers will implement looser rules overseeing the vast pool of financial products, adding to evidence that regulators are going soft on the deleveraging campaign of squeezing excessive liquidity.

The Shanghai Composite Index surged 2.1 per cent in a rally that started in the afternoon session on Friday, snapping a five-day, 2.3 per cent loss. Shares worth 348.1 billion yuan (US$51.4 billion) changed hands on the Shanghai and Shenzhen exchanges, the most in a week.

Hong Kong’s Hang Seng Index also ended the day higher.

The yuan also reversed intraday losses in both onshore and offshore trading on speculation of intervention by the central bank.

The rally in equities was spurred by a report from the 21st Century Business Herald that policymakers will finally implement less stringent rules on asset management and wealth management products offered by financial institutions.

Publicly sold products will be allowed to invest in some non-standard assets, referring to securities that do not trade on exchanges or the interbank market, banks will be given more freedom to convert shadow bank lending to loans on the balance sheet, and lenders will be allowed to rectify wealth management products on their own, the report said.

An earlier report from China Business News said this week that the central bank will provide funds to banks that invest in lower-rated corporate bonds, adding to evidence that the government is shifting to more growth biased policies.