Policy optimism sends stocks up

Shanghai stocks jumped more than 2 percent on Monday, as market sentiment was lifted by policy stimulus.

The Shanghai Composite Index gained 2.1 percent to close at 2,883.10 points.

Shares of brokerages, computer and telecommunication firms were among the biggest gainers.

China’s central bank unveiled a plan to improve the loan prime rate mechanism to cut financing costs for the real economy. 

China Merchants Securities said that the changes will boost expectations of monetary policy loosening in the short term, helping lift risk appetite, as Reuters reported.

CMS added that in the longer term, there would be stronger support for the stock market as expected investment returns could benefit from lower borrowing costs, thus improving financing needs and alleviating downward pressure on the economy.

Shares of brokerages rose after the Securities Association of China said that the securities sector had seen sharp growth in net profits in H1.

In the first six months, net profits of 131 listed securities companies doubled from the same period a year earlier, amounting to 66.7 billion yuan (US$9.52 billion).

Shares related to Shenzhen also jumped after the government said that it would make Shenzhen a pilot demonstration area of socialism with Chinese characteristics.

Citic Securities Co Ltd jumped 8.44 percent to 23.13 yuan and Koal Software Co Ltd rose 9.98 percent to 25.23 yuan.