* SSEC up 1.97%, CSI300 up 2.55%<\/p>\n
* Foreigners lend support as net buyers through Stock Connect<\/p>\n
* New Delta variant virus cases continue to rise<\/p>\n
* China government bond yields lowest in more than 1 year (Updates to China close, adds comments, changes slug to CHINA-STOCKS\/)<\/p>\n
SHANGHAI, Aug 2 (Reuters) – Chinese shares jumped on Monday, with the benchmark indexes logging their biggest daily gains since May, as investors snapped up stocks battered by a sell-off last month.<\/p>\n
The Shanghai Composite index finished the day up 1.97% at 3,464.29 points and the blue-chip CSI300 index ended 2.55% higher. It was the biggest daily rise since May 25 for both indexes.<\/p>\n
The gains follow a near 5.5% fall for the CSI300 last week, capping its biggest monthly loss since October 2018 after a string of regulatory moves aimed at the after-school education, tech and property sectors.<\/p>\n
\u201cI think the China A-share market became an unnecessary victim of the recent regulatory events. The so-called \u2018clampdown\u2019 is really just on a few sectors and Chinese ADRs rather than A-shares in general,\u201d said Qi Wang, chief executive officer at MegaTrust Investment in Hong Kong.<\/p>\n
\u201cSeriously, what\u2019s the connection between closing down cram schools and people consuming more or less liquor, for example? I don\u2019t see any.\u201d<\/p>\n
Both the CSI300 and Shanghai Composite indexes had fallen around 1% in early trade on rising concerns over a domestic surge in Delta variant COVID-19 infections. China on Monday reported 98 new confirmed coronavirus cases in the mainland for the day earlier, the highest daily rise since Jan. 24.<\/p>\n
Those concerns also weighed on the fixed income market, where benchmark Chinese government bond (CGB) yields dropped to their lowest level in more than a year. The most-traded CGB futures contract for September delivery ended up 0.23%.<\/p>\n
Adding to worries over the economic outlook, a private sector survey showed China\u2019s factory activity growth fell to a 15-month low in July.<\/p>\n
But by mid-morning, investors\u2019 focus shifted to the attractive valuations of stocks after last week\u2019s rout. The CSI300 financial sector sub-index finished up 2.2% and the consumer staples sector jumped 4.85%.<\/p>\n
Data from Refinitiv showed foreign investors were net buyers of A-shares on Monday, with inflows through the Northbound leg of the Stock Connect programme topping 9.55 billion yuan ($1.48 billion).<\/p>\n
\u201cWe believe short-term volatility creates opportunities for long-term investors. The A-share market should resume an upward trajectory after domestic credit growth bottoms,\u201d Meng Lei, A-share strategist at UBS Securities said in an emailed comment.<\/p>\n