China’s main stock indexes rose more than 2 per cent on Monday, to a new seven-year high, as investors piled into blue-chips, ditching small-caps on valuation concerns, ahead of MSCI’s decision on including Chinese shares to its global index.

The CSI300 index of the largest listed companies in Shanghai and Shenzhen rose 2.4 per cent to 5,353.75, while the Shanghai Composite Index gained 2.2 per cent to 5,131.88 points.

Turnover in Shanghai A shares hit a record, exceeding 1.3 trillion yuan ($209.54 billion).

MSCI will announce on June 9 whether to include so-called China ‘A’ shares in its Emerging Markets Index, a decision the index publisher says would draw $400 billion to China stocks over time.

Large-caps that could benefit the most from the inclusion, such as banks, performed strongly on Monday. “Investors seem to be building positions ahead of the announcement,’’ said Gerry Alfonso, director at Shenwan Hongyuan Securities Co.

Analysts said that blue-chips also benefited from expectations that mergers and acquisitions in the state sector would accelerate, after President Xi Jinping on the week-end had called for strengthening Communist Party leadership at state-owned enterprises (SOEs), and vowed to push forward SOE reforms.

But Shenzhen’s tech-heavy growth board ChiNext slumped 4.4 per cent, after China’s asset management association urged mutual fund managers to refrain from speculative trading and from blindly following market trends.

Financial stocks jumped. Bank of Communications shares surged by their 10 per cent limit in Shanghai as investors continue to bet the state lender will have reforms letting private investors play a more active role in management.

Transportation stocks also rose sharply, led by CRRC Corporation Ltd, up 10 per cent in Shanghai. It is now the world’s largest in market value after a merger between CSR Corp and China CNR. ($1 = 6.2042 Chinese yuan)

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