Stocks rose on the Chinese mainland, pushing up the benchmark index by the most in two months, after the central bank refrained from increasing interest rates and government reports showed the economy is withstanding tightening policies.
PetroChina Co and Jiangxi Copper Co led an advance for commodity stocks after China International Capital Corp said material companies will benefit from a faster inflation environment.
Poly Real Estate Group Co gained the most in two weeks after the central bank ordered banks to set aside more reserves instead of increasing borrowing costs as investors had speculated.
Offshore Oil Engineering Co and China Oilfield Services Ltd jumped by the 10 percent daily cap as the Shanghai Securities News said ocean engineering will be included in a development plan.
The decision not to boost rates "is fairly positive news", said He Zhen, who helps manage $301 million at Shanghai Huili Asset Management Co. "The central bank will be very cautious about raising interest rates."
The Shanghai Composite Index, which tracks the bigger of China's stock exchanges, advanced 81.91, or 2.9 percent, to 2,922.95 at the close, the biggest gain since Oct 15.
The CSI 300 Index added 3.1 percent to 3,261.06.
The Shanghai gauge has lost 7.5 percent since reaching an almost seven-month high on Nov 8 on concern that monetary tightening will curb economic growth. The measure is down 11 percent this year, Asia's worst performer, as the central bank last month twice ordered banks to set aside larger reserves after raising rates in October, the first increase since 2007.
Measures of energy and material stocks jumped 5.4 percent and 4.4 percent respectively, the second- and third-biggest gains among the CSI 300's 10 industry groups.
PetroChina, the nation's biggest oil company, climbed 4.4 percent to 11.95 yuan. Jiangxi Copper, China's biggest producer of the metal, surged the maximum 10 percent to 41.42 yuan.
Tongling Nonferrous Metals Group Co, the second biggest, advanced 8.6 percent.
Material companies outperform because the supply of basic materials is limited while demand is inelastic, Hao Hong, a Beijing-based CICC global equity strategist, wrote in a report on Monday. China's stocks aren't likely to have a "major correction" in the short term, as November economic data erased concerns about economic growth, CICC analysts wrote in a separate note.
The data showed the economy is withstanding government curbs. Industrial-output growth accelerated to 13.3 percent last month from a year earlier, exceeding economists' median estimate of 13 percent. Urban fixed-asset investment also grew at a faster pace, climbing 24.9 percent in the first 11 months of 2010. Retail sales gained 18.7 percent in November.
So-called cyclical stocks with large and medium capitalizations such as non-ferrous metal producers and financial companies will rebound if the central bank doesn't raise rates by the end of the year, CICC said in the report.
A gauge of property stocks advanced 3.2 percent. Poly Real Estate, China's second-largest developer by market value, gained 4.5 percent to 12.59 yuan. China Vanke Co, the biggest, climbed 3.7 percent to 8.40 yuan. Gemdale Corp, the fourth biggest, rose 2.4 percent to 5.94 yuan.
Consumer prices rose a more-than-forecast 5.1 percent from a year earlier, a statistics bureau report showed over the weekend. Producer-price inflation was 6.1 percent, higher than any of 28 economists surveyed by Bloomberg News had estimated.
The statistics bureau brought forward the release of economic data to Dec 11 from Dec 13, signaling to some economists that a rate increase could come as early as the weekend. Instead, the central bank boosted reserve requirements by 50 basis points starting Dec 20, the third increase in five weeks.
