China Stocks Look Set to Extend Tuesday’s Gains

Analysts say China stocks may extend gains on Wednesday if trading volumes increase; turnover in the past two trading days has been thin.

The Shanghai Composite gained 1.06 percent to end at 2373.31 on Tuesday, buoyed by property and construction stocks.

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Market Factors:

The state planning agency (NDRC) said a slew of guidelines on allowing more private investment into areas like energy, financial services, and telecommunications will be issued in the next month. This week the Ministry of Railways and Ministry of Health have both eased restrictions on private investment. Unleashing the power of the private sector is a key part of China stabilizing economic growth.

The Supreme People's Court issued China's first law on securities insider trading which takes effect on June 1. The number of insider trading cases has risen exponentially in recent years.

The Shenzhen stock exchange starts taking applications for China's first "junk bonds" pilot scheme on Wednesday. Applicants should be small and medium-sized unlisted firms. The bonds must be on the market for more than one year and interest rates must be lower than three times the national benchmark interest rate. The first bonds are likely to be launched in mid-June.

Stocks to Watch:

Property stocks - Real estate consultancy Homelink reports that new housing transactions in 10 major Chinese cities (including Beijing, Shanghai, and Guangzhou) rose 22.6 percent month-over-month in the first three weeks of May.

—By Cheng Lei, CNBC Asia Pacific