The Shanghai Composite Index gained 0.8 percent during Friday session. The benchmark index is now more than 20 percent up from its low in January. The spike also indicates the beginning of a "bull market." However, the index is still 48 percent down from its 2007 high.

The index was buoyed by the movements shown by infrastructure and material stocks. The uptick also indicates that the Chinese economy is entering a stable phase. Another positive news to uplift the market related to the link between Shenzhen and Hong Kong. The link is scheduled to go live on November 21. It is designed to allow the investors to trade in shares in China as well as in Hong Kong.

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The Chinese stock markets rose despite the yuan dipping to a record low. However, the decline is likely to benefit Chinese stocks as they make their overseas foray under the One Belt, One Road initiative. It is expected that the yuan may fall further due to uncertainty about US trade policies.

China increased government spending, leading to increased activity in the construction and commodity sector. However, it is also taking steps to rein in the rampant housing market. The restrictions on real estate markets are expected to direct the funds towards stock markets.

Li Jingyuan, general manager at Shanghai Bingsheng Asset Management, told Bloomberg that "Liquidity is abundant and property curbs will prompt more money to flow into stocks, which look undervalued relative to homes in large cities." He added that the index might touch the 3,900 mark.

China, the world's second-largest stock market, saw wild swings last year. The extreme movement led the government to take extensive steps such as curbing short selling and state funding for equity purchase.

TagsShanghai Composite Index, china, stock markets