(Yicai Global) July 3 -- Chinese mainland stocks had a good start to the second half of the year thanks to mounting positive economic data, more targeted rate cuts by the central bank and speculation about a potential giant merger of brokerages.

The Shanghai Composite Index gained 5.8 percent this week to 3,152.81, a peak since April last year, while the Shenzhen Component Index climbed nearly 5.3 percent to 12,433.26, a more than four-year high. The ChiNext Price Index, which tracks growth stocks in Shenzhen, rose almost 3.4 percent to 2,462.56, also the highest in over four years.

Investor confidence was buoyed by the release of upbeat figures on China’s economic recovery through the week and a central bank move to trim refinancing and rediscount rates.

The purchasing managers’ index for manufacturing, an official gauge of factory activity in China, rose for a fourth month in a row in June, increasing 0.3 point to 50.9, the National Bureau of Statistics said on June 30. That was reinforced a day later by the Caixin manufacturing PMI. The privately compiled benchmark extended its gains for a second straight month, rising to a six-month high of 51.2. Caixin’s PMI for the services sector, released today, had its biggest expansion in a decade.

On July 1, the People’s Bank of China cut the re-lending interest rate for the agricultural sector and small businesses by 0.25 percentage point, while it shaved the rediscount rate by the same amount.

The move was aimed at supporting the weak links in the real economy, but does not represent a renewed easing of monetary policy, Wang Yifeng, chief banking analyst at Everbright Securities, told Yicai Global earlier.

Market turnover, a key measure of activity on China’s equity markets, also jumped over the past two days, surpassing CNY1 trillion (USD141.5 billion).

Securities companies spearheaded today’s gains on speculation of a mega-merger between China’s largest broker Citic Securities and its closest rival China Securities, though both dismissed a Bloomberg News report that said the pair have agreed to combine to create a USD82 billion financial behemoth.

A dozen brokerages hit the exchange-imposed daily limit of 10 percent. China Merchants Securities [SHA:600999] finished at CNY26.57 (USD3.76), Citic Securities [SHA:600030] at CNY28.67, Shenwan Hongyuan Group [SHE:000166] at CNY5.94 and China Life Insurance [SHA:601628] at CNY33.04.

Editor: Kim Taylor