An outdoor billboard in Shanghai shows the Shanghai Composite Index rebounding 1.16 percent to 3,140.72 points on May 6, 2024. Photo: VCG

Chinese stocks staged a strong comeback on Monday after the May Day holidays, with major indices posting significant gains in response to robust economic indicators and booming consumption, signaling vibrant market dynamics.

Following the five-day holiday break, the A-share market opened strongly on Monday, with a broad rally across the board. The Shanghai Composite Index rose by 1.16 percent to close at 3,140.72, while the Shenzhen Composite Index climbed 2 percent, ending the day at 9,779.21. 

The surge also marked the fourth consecutive day when trading volume exceeded 1 trillion yuan ($141.4 billion).

The reopening of the market after the five-day holidays saw widespread gains across many sectors, continuing the upward momentum seen before the holiday break, Yang Delong, chief economist at Shenzhen-based First Seafront Fund, told the Global Times on Monday. 

Experts said the market's gains reflected strong consumer demand, increasingly optimistic economic recovery expectations, and supportive government policies. 

Benefiting from booming travel and spending during the May Day holidays, consumption-related stocks are expected to see a favorable uptrend in the coming days, Wang Yu, an analyst at Donghai Securities, told the Global Times on Monday.

The holidays generated a significant uptick in consumer spending. According to the Chinese Ministry of Culture and Tourism, 295 million domestic passenger trips were made, up 7.6 percent year-on-year. Spending by tourists totaled 166.8 billion yuan, marking a 12.7 percent increase year-on-year.

The spending figures led to a rally in consumption-related stocks on Monday. Notably, sectors such as food and beverages performed particularly well, with Guizhou Moutai's shares up by 3.24 percent, those of Wuliangye Yibin up by 3.04 percent, and shares of COFCO Technology up by 4.92 percent. Additionally, the CSI 300 Index, which tracks the top 300 issues on the Shanghai and Shenzhen stock exchanges, jumped 1.48 percent to 3,657.88.

Supporting the bullish sentiment were the latest manufacturing and services purchasing managers' index (PMI) readings indicating economic expansion. The National Bureau of Statistics reported that the manufacturing PMI for April stood at 50.4, the second consecutive month of expansion. The services business activity index was also positive at 51.2. 

Caixin reported a services PMI of 52.5 for April, maintaining expansion territory. The manufacturing PMI reached a new high for the year in March at 51.4.

Positive expectations for the property sector, fueled by relaxed housing policies in several regions, contributed to the market's optimism, experts said. "The shift in real estate policies is expected to unleash significant housing demand, stabilizing both the property market and prices, thus further boosting the economy," Yang said. 

The focus on real estate was underscored by a recent high-level meeting. On April 30, Political Bureau of the Communist Party of China Central Committee emphasized the need for a new model for real estate development to mitigate key sectoral risks and foster sustainable economic growth.