Hong Kong shares rose sharply to a record close Monday, boosted mainly by Chinese mainland-related companies, after Beijing said it will allow approved mainland banks to invest in overseas stocks and structured equity products.

The Hang Seng Index ended up 511.03 points, or 2.5 percent, at 20,979.24, after trading between 20,870.01 and 21,065.59 during the session.

The H-share index rose 5.4 percent to end at record 10,948.72 on expectations the Chinese mainland funds will invest heavily in H-shares.

Turnover was also a record at 94.99 billion Hong Kong dollars (about 12.17 billion U.S. dollars), up from 60.69 billion Hong Kong dollars (about 7.77 billion U.S. dollars) on Friday.

Traders said the change to China's Qualified Domestic Institutional Investment program provides more of a psychological boost to Hong Kong equities, as the initial investment amount will likely be insignificant.

Previously, mainland banks were limited to investing client funds only in fixed-income products overseas under the program. Nevertheless, experts think this measure could be long-term positive if the measure proves successful in diverting excess liquidity in the mainland and helps cool investment fever in the A-share market.

Credit Suisse Group said in a research report Monday it expects overseas companies familiar to Chinese investors and prominent Chinese companies not listed in the A-share market to benefit most from the change to the QDII program. Such companies include China's largest life insurer by premiums, China Life, which ended up 5.9 percent at 26.05 Hong Kong dollars. Another heavyweight, HSBC, rose 1.3 percent to 146.90 Hong Kong dollars and China Mobile gained 3.9 percent to 73.75 Hong Kong dollars.

Chinese insurer Ping An jumped 7.3 percent to 47.70 Hong Kong dollars on Monday after the index compiler's statement following Friday's close that the company will become a blue chip effective June 4.

Chinese financial institutions also rose sharply on hopes they will handle increased capital outflows from China. China's largest bank by assets, the Industrial and Commercial Bank of China, gained 2.4 percent to 4.31 Hong Kong dollars.

Hong Kong bourse operator, Hong Kong Exchanges and Clearing, a prime beneficiary of the change to the QDII program, rose 10.8 percent to 88.75 Hong Kong dollars.

Dual-listed companies with H-shares trading at a substantial discount to their A-share counterparts would also benefit, Credit Suisse said.

Chinese steel maker Maanshan Iron jumped 13.8 percent Monday to 6.78 Hong Kong dollars while copper producer Jiangxi Copper surged 18.9 percent to 13.4 Hong Kong dollars. Both are trading at a large discount to their A-share peers.

Li and Fung bucked the market uptrend on concerns about a slowdown in the U.S. retail environment, ending 0.2 percent lower at 26.30 Hong Kong dollars. Chinese electrical appliance maker GOME fell 11.5 percent to 12.56 Hong Kong dollars on profit-taking, after reaching a 52-week intraday record high of 15 Hong Kong dollars Friday, on news it is raising 776 million U.S. dollars in net proceeds through a placement and convertible bond issue.

Source: Xinhua