China Stocks Rise Most Since January on PMI, Bond-Swap Optimism

China stocks rose the most since January as an official manufacturing gauge showed a third month of expansion and speculation increased the government will take steps to tackle local government debt.

AVIC Aircraft Co. led gains for industrial companies after the Purchasing Managers Index rose to 50.2 in May. Policy makers are considering doubling the size of a clean-up program for shaky local government finances, people familiar with the matter said. A gauge of utility companies jumped 6.8 percent, led by Huaneng Power International Inc., on expectations the government will boost mergers among power companies.

The Shanghai Composite Index climbed 4.7 percent to 4,828.74 at the close, extending its gain this year to 49 percent. The gauge rebounded after a 6.5 percent rout on Thursday, which was sparked by concern brokerages were tightening lending restrictions at the same time as the central bank was draining cash from the financial system. The index’s 30-day volatility rose to the highest in almost four months.

Source : Bloomberg