Stocks rally strongly on liquidity hopes

China stocks rallied strongly on Friday with expectation of increased liquidity after media reports said a new round of renminbi qualified foreign institutional investor (RQFII) quotas will be approved soon.

The Shanghai Composite Index rose 2.14 percent and closed at 2,244.64, its best performance in a month. Sectors including finance shares, nonferrous metals and food led the rally.

The 21st Century Business Herald on Friday quoted Bosera Asset Management as saying the stock market regulator has started taking quota applications under the RQFII scheme after a suspension in February and March.

Meanwhile, a source said the China Securities Regulatory Commission and the State Administration of Foreign Exchange had met MSCI index managers to discuss the potential addition of A shares into MSCI emerging market indexes.

"From now on, to the second quarter, there will be a big rally on China's stock market," added Wendy Liu, managing director and head of China equity research at Nomura.

Nomura on Wednesday released a report giving a bullish outlook for A shares.

"With MSCI-China having tested the 57-58 range we had forecast in March, we see the rest of April and early May as the interim bottom, with 10-15 percent upside likely in the coming months," the report said.