Chinese brokerages saw sharp gains, closing up over 9 percent on average, with Founder Securities gaining 10 percent, Citic Securities adding 10 percent and Haitong Securities higher by 9.84 percent.
State-backed China Securities Finance Corporation, which provides margin financing loan services to securities companies, announced on its website last Friday it will restart offering loans to Chinese securities firms for periods ranging from 7 days to 182 days, reported Bloomberg.
On Monday, data on its website showed interest charged on 7-day loans was 3.4 percent, while 182-day loans were charged 3 percent, down from 4.8 percent on Friday.
"The China Securities Finance Corporation loosened controls on margin lending on Friday and Chinese markets have responded in kind, rallying aggressively as soon as they reopened," said Angus Nicholson, a market analyst at spreadbetter IG, in an afternoon note.
Francis Cheung, head of China and Hong Kong strategy at CLSA, agreed.
Cheung told CNBC that China Securities Finance's statement was "clearly a catalyst" behind today's strong showing by Chinese markets. He said investors were previously cautious that the Chinese national team had been supporting the market during the National People's Congress (NPC) meeting and the "worry was that they would stop after the meetings."
"But the NPC and the government work plan told us that the government wanted aggregate financing (stock) to go up this year by 13 [percent] and given the banks are under-pressure, that leaves the stock and bond market," Cheung said by email, adding, "PBOC [governor] Zhou said over the weekend that corporates are overly leveraged and should use more equity financing. This implies that the government wanted a stronger stock market."
Nicholson added, "The stimulus taps are clearly being turned back on, despite new government efforts to rein in debt such as the new debt-equity swaps being offered to Chinese banks. The "reflationistas" and heavy spenders of Chinese politics seem to have come out the winners from China's recent NPC."