May 31, 2016 / 4:31 AM / 2 years ago

China shares jump on rising foreign interest; Hong Kong benefits

* CSI300 +2.6 pct; SSEC +2.4 pct; HSI +1.2 pct

* Foreign interest in China shares rise ahead of MSCI decision

* Financial shares lead China rally

SHANGHAI, May 31 (Reuters) - China stocks jumped to a three-week high on Tuesday, with financials leading a broad rally as investors bet that MSCI will add mainland shares to its index for the first time next month.

The blue-chip CSI300 index rose 2.6 percent, to 3,147.13 points by the lunch break, while the Shanghai Composite Index gained 2.4 percent, to 2,891.15 points.

Such excitement on the mainland - rarely seen over the past month - spilled into Hong Kong, where main indexes rose more than 1 percent.

The CSOP FTSE China A 50 ETF - the largest offshore exchange-traded fund that enables direct foreign investment to Chinese shares - saw a net capital inflow of about 2 billion yuan ($303.9 million) on Monday, the largest single-day inflow in the past year, the ETF’s manager announced after the market close.

“We are very pleased to see the return of global institutional investors to the Chinese A-share market,” Ding Chen, CEO of CSOP Asset Management Ltd, said in an e-mailed statement.

In another sign of rising foreign interest in mainland shares, there was a net inflow of 2.4 billion yuan on Monday into the Chinese market through the north-bound leg of the Shanghai-Hong Kong Stock Connect, the biggest one-day inflow in 1-1/2 months.

“Investors are now betting China shares will be included into the MSCI Emerging Market index,” said Wu Kan, head of equity trading at investment firm Shanshan Finance.

The excitement around the index publisher’s decision next month is injecting some life into a market suffering from torpor and seeking a sense of direction, Wu added, although he also cautioned that the rally could be short-lived.

Shares rose across the board, with financial, IT and consumer shares, leading the gains.

In Hong Kong, the Hang Seng index added 1.2 percent, to 20,885.57 points, while the Hong Kong China Enterprises Index gained 1.6 percent, to 8,762.45.

($1 = 6.5821 Chinese yuan)

Writing by Samuel Shen and Nathaniel Taplin; Editing by Jacqueline Wong

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