Shanghai index surges 3% after rate cut

Investor smiles at a securities brokerage in Fuyang city, East China's Anhui province, May 11, 2015. [Photo/IC]

Chinese stocks rallied the most in three months after the central bank announced a 25 basis points cut on benchmark interest rate.

The benchmark Shanghai index jumped three percent or 127.67 points to 4,333.58 on Monday, while the Shenzhen Component Index advanced 3.2 percent to 14,944.88 points. About 280 stocks surged by the daily limit.

Internet companies led the gain, as video-streaming and entertainment firm LeTV, financial software provider Hundsun Technologies and online education platform Talkweb jumped by the daily limit of 10 percent.

Healthcare sector remained bullish, with diagnosis service provider Di An Diagnosis China Resources Wandong Medical Equipment Co surging by 10 percent.

Insurers rebounded, as New China Life Insurance advanced 8 percent, and China Pacific Insurance, China Life Insurance and China Ping An climbed more than 2 percent.

The rally in stock and bond market will continue in the downward trend of the interest rate, said Guan Qingyou, executive director of Minsheng Securities research institute on Monday.

The People's Bank of China announced over the weekend a third rate cut in the past six months, lowering the one-year benchmark lending rate and deposit rate to 5.1 and 2.25 percent respectively.

The downward trend on interest rate is set to continue, with more rate cuts on the way, said analysts, amid the central bank's move to slash financing cost and shore up the economy.

Haitong Securities, the country's second-largest brokerage, expects there will be at least another four rate cuts in the future.