Chinese financial markets rose to levels not seen since May 2008, with share price surges, as investors expect more government action to help stimulate the economy.

The Shanghai Composite Index widened 2.1 percent to 3,577.30 and trading reached almost double the 30-day average. The index is now valued at 13.5 times the estimated earnings for the next 12 months versus the five-year average of 10.3

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The CSI 300 Index likewise grew 2.4 percent as Hong Kong's Hang Seng China Enterprises Index rose 1.2 percent, and the Hang Seng Index inched up 0.9 percent.

Meanwhile, interbank lending rates slid after the People's Bank of China cut the yield in seven-day reverse repurchase operations and rolled over CNY350 billion (US$56 billion) loans to banks.

"High trading activity means the stock market will be supported," remarked Yan Liu, a trader at Guosen Securities Co. in Shenzhen. "Speculation of more stimulus to come is helping to propel the market higher," he concludes.

A gauge monitoring financial firms increased 2.4 percent

China Everbright Bank Company, the banking unit of government-owned Everbright Group, saw its shares surge 9.5 percent, the most this year following the announcement that the company may spin-off its wealth-management business.

Pangang Group Vanadium Titanium & Resources Co. similarly rose by the 10 percent daily limit, closing at its highest since January 7, leading mining firms ahead. China Eastern Airlines Corp. leapt 6.3 percent, rallying for the third straight day, as energy prices dropped to 6-year lows.

Property firms were also gainers with Poly Real Estate Group Co. added 5.1 percent as China Vanke Co. soared 4 percent.

However, new-home prices dove in 66 of 77 cities, according to the National Bureau of Statistics. The government's plans to resuscitate the industry have yet to come to fruition even after it cut interest rates and removed property curbs.

TagsChinese Financial Markets, Government Boosts