SHANGHAI: Chinese shares rose sharply on Thursday after a state fund increased its stakes in the country’s biggest banks following a slew of stimulus measures to revive the flagging stock market.

China’s blue-chip CSI300 index gained 1% by the midday recess, while the Hang Seng Index climbed 1.9%.

Asian shares also rose, as markets wagered that U.S. rates have peaked after more dovish remarks from Federal Reserve officials, while traders awaited the U.S. consumer inflation report later in the day for further monetary policy clues.

China’s “Big Four” state banks said late on Wednesday that their controlling shareholder Central Huijin Investment bought their Shanghai-traded shares, and plans to further increase its holdings in the next six months.

The measures came after China’s blue-chip CSI300 index fell to an 11-month low this week, despite a slew of supportive measures from the government and signs that a shaky economic recovery is gradually stabilising.

“The ‘real money’ by Central Huijin is of great significance to the stock market,” said Yang Delong, chief economist at First Seafront Fund Management.

“It sent a strong signal of ‘continuous investment’ in the market. This will play an important and positive role in boosting investor confidence.”

Shares of banks climbed 1.7%, while insurers added 3.2%. New energy companies and automobile firms advanced 2.5% and 3.9%, respectively. Meanwhile, tech giants listed in Hong Kong rose 1.6%.

Investors are awaiting more economic indicators due later in the week, including new yuan lending and trade data for September, to gauge the recovery momentum.

Shuang Ding, chief economist at Standard Chartered Bank, said market consensus may have underestimated China’s economic growth in the third quarter.

“For Q3 GDP, the consensus forecast is currently 4.5%, we think an outcome of around 5% is more likely, based on available data for July and August and consensus estimates for September real activity,” Ding said.

Meanwhile, market sentiment was also boosted by signs of an improvement in Sino-U.S. relation. The United States said it had accepted an invitation to attend China’s top annual security forum in late October, the latest sign of potentially warming ties between the two countries’ militaries.

Overseas investors bought a net 6 billion yuan ($821.97 million) of Chinese shares via the Stock Connect so far on Thursday, following a four-session selling streak. – Reuters