China stocks rose sending the Shanghai Composite Index to a second day of gains

China Citic Bank Corp. led an advance for mainland lenders, rallying 4.6 percent. Sichuan Kelun Pharmaceutical Co. surged 3.1 percent as a sub-index of health-care companies climbed the most among industry groups. PetroChina Co. and China Petroleum and Chemical Corp. slid 1.5 percent in Hong Kong, dragging down the Hang Seng China Enterprises Index.

The Shanghai Composite added 0.4 percent to 2,315.93 at the close. The CSI 300 Index rose 0.3 percent. The central bank cut a rate it pays on repurchase agreements to the lowest since January 2011. The rate cut and cash injection to banks this week signal efforts to bolster the economy after new-home prices fell in 68 of 70 cities tracked by authorities last month.

“There are expectations for more looser policies,” Larry Wan, chief investment officer at ZhongRong Life Insurance Co., said by phone in Beijing. “It’s obvious the government wants the stock market to rise. The property data may be negative, but people are betting on more reforms.”

Monetary Easin

The Shanghai Composite has risen 16 percent since mid-March and trades at 8.4 times projected 12-month earnings. The H-shares measure has fallen 5.3 percent after hitting a high this year on Sept. 8 and has a multiple of 6.9. Trading volumes in Shanghai were 7.5 percent above the 30-day average for this time of day, according to data compiled by Bloomberg.

The Hang Seng China AH Premium Index jumped 1.1 percent for the biggest gain since Sept. 10, signaling a narrowing gap between dual-listed stocks.

The People’s Bank of China sold 10 billion yuan ($1.6 billion) of 14-day contracts at 3.5 percent today, according to a statement on its website. That compared with 3.7 percent at a Sept. 16 auction and is a further sign of monetary easing after the central bank supplied 500 billion yuan to the nation’s largest commercial lenders via its standing lending facility.

Home Prices

In mainland trading, banks and drugmakers led gains. China Citic climbed the most in two months. Bank of Communications Co. advanced 1.9 percent. A measure of health-care companies in the CSI 300 added 1.5 percent, the biggest gain among 10 industry groups. Yunnan Baiyao Group Co. advanced 1.5 percent.

“In the short term, property shares may drag the market lower,” said Zhou Lin, an analyst at Huatai Securities Co. “Sentiment is still weak on economic data” and concerns new share sales will divert funds from existing equities, he said.

The People’s Bank of China move to provide funds to the nation’s five largest banks will help overcome any pre-holiday cash crunch, though is unlikely to move the needle on gross domestic product, according to economists at banks including Barclays Plc. The nation’s financial markets will be shut for about a week in early October for the National Day holidays.