SHANGHAI - China's securities watchdog has given the go-ahead for five new mutual funds after a two-month hiatus in approvals, spurring a rally as jittery investors returned after a week of losses.

Shanghai's key index gained 0.8 percent to 2,737.73 on Thursday, while the Shenzhen Composite Index rose 1.8 percent to 678.76.

The notice, posted on the China Securities Regulatory Commission's Web site, did not list the names of fund that had won approval.

The move is expected to bring another 30 billion yuan (US$3.9 billion;euro3 billion) into the markets, the official Xinhua News Agency and other reports said, citing unnamed industry sources.

The commission had suspended approvals for new mutual funds late last year amid worries that prices were rising too fast amid a speculative binge.

The Shanghai Composite Index gained 130 percent last year and had jumped nearly 10 percent in January alone before a recent correction took it back to about where it started the year.

The exact date for launching the new funds was not given, Xinhua said. It said another 20 new funds were awaiting approval from the commission.

The 21st Century Business Herald and Guangzhou Daily reported Thursday that the new equity funds were being offered by CCB Principal Asset Management Co., First State Cinda Fund Management Co., China Universal Asset Management Co., Zhonghai Fund Management Co. and Huafu Fund Management Co.

China still limits foreigners' purchases of the yuan-denominated stocks that make up the biggest share of the markets, though that is gradually changing as regulators allow increasing participation by so-called qualified foreign institutional investors.

Foreign institutional investors have been a major source of market activity in recent weeks, but the newfound volatility appears to have worried regulators accustomed to less violent swings in share prices.

Mutual funds raised more than 400 billion yuan (US$51.6 billion; euro40 billion) on mainland Chinese bourses last year as retail investors shifted low-interest bank deposits into the market, the Hong Kong newspaper South China Morning Post reported.

China has more than 320 mutual funds, most of them aimed at stock investments, it said.