Stocks powered by banks on financial deregulation

Chinese mainland major indexes extended gains on Monday, powered by banking firms, as investors cheered the country’s deregulation in the financial sector, mitigating wider concerns about higher corporate borrowing costs as bond yields rose.

The blue-chip CSI300 index rose 0.39 percent to 4,128.07 points, while the Shanghai Composite Index was up 0.44 percent to 3,447.84 points.

Investors piled into financial stocks, betting the Chinese government’s move to widen foreign access to its giant financial sector would attract fresh foreign capital inflows and push up the valuations of Chinese lenders, insurers and brokerages.

The latest changes, announced by vice finance minister Zhu Guangyao on Friday, include raising the limit on foreign ownership in joint-venture firms involved in the futures, securities and funds markets to 51 percent from the current 49 percent. Meanwhile, China will drop the foreign ownership cap on banks.

“The relaxation of existing curbs will ease restrictions on investment inflows to China,” wrote Raymond Yeung, ANZ’s chief economist of Greater China.

“Given the fast expansion in financial assets over the past few years, we believe that there will be a slew of optimistic headlines carrying positive emphasis on their value.”

Banking shares led the gains, with an index tracking the sector closing up 1.40 percent.

The strength in banking stocks counteracted wider fears stirred by rising bond yields, with China’s benchmark 10-year treasury yield up at the highest level in three years.

Resources stocks also firmed, with sector leader Wanhua Chemical leaping 8.33 percent, leading the rally in material firms.

But healthcare and utilities shares took a breather, as investors booked profits after recent gains.