Shanghai stocks snapped a four-week losing streak, opening after a three-day holiday to news that securities regulators are increasing quotas on foreign funds investing in yuan-denominated shares.

The rally was also underpinned by the trading debut of a new exchange-traded fund that tracks the performance of stocks in Shanghai and Shenzhen.

The Shanghai Composite Index surged 1.7 percent, the biggest jump in two months, to 2,302.24 points yesterday.

Brokerages rallied by 5.6 percent on average on hopes of more business as the expanded funding hits the market. Citic Securities, the biggest listed brokerage, jumped 5.8 percent to 12.26 yuan (US$1.94). Haitong Securities surged 7.8 percent to 9.71 yuan and Industrial Securities advanced 5.5 percent to 10.11 yuan.

The China's Securities Regulatory Commission said on Tuesday that it has raised the quotas for qualified foreign institutional investment in stocks, bonds, and bank deposits from US$30 billion to US$80 billion. The yuan-denominated foreign investment has also been granted an extra quota of 30 billion yuan, which brings its total amount to 50 billion yuan.

Meanwhile, the CSI 300 Exchange-Traded Fund - the first to be listed on the two domestic exchanges - began trading on the Shanghai and Shenzhen bourses yesterday. An ETF is a fund that tracks the performance of a group of stocks.

Source:shanghaidaily