Shanghai's key stock index rose the most in 12 trading days today thanks to a wide rally as investors showed confidence in the market after the watchdog said it would tighten scrutiny in approving additional share sales.

The Shanghai Composite Index, which tracks yuan-denominated A shares and hard-currency B shares, added 2.26 percent, or 95.87 points, to 4,334.05.

Gainers in the Shanghai market outnumbered losers 749 to 90 while 13 were unchanged.

The Shenzhen Composite Index, which covers the mainland's smaller stock market, increased 2.49 percent, or 32.98 points, to close at 1,355.31.

China's securities regulator said on Monday night it will "strictly" examine applications from listed companies seeking to sell additional shares after investors expressed concern that rising supply triggered recent sell-offs.

Companies should "prudently" consider the amount, timing and affordability of offerings before deciding on secondary fundraisings, the regulator said.

Ping An Insurance (Group) Co surged for a second day on the expectation that China's second-largest insurer may delay its plan to sell 1.2 billion new shares and convertible bonds.

Ping An, the country's second largest insurer, rose 5.56 percent, or 3.78 yuan (53 US cents), to 71.82 yuan.

Ping An announced on January 18 the sale to replenish capital, less than one year after the company raised 38.9 billion yuan in a public offering in March last year. Its Shanghai-traded stock has plunged 27 percent since the announcement.

China Merchants Bank Co led lenders higher today after JPMorgan Chase & Co said investors have underestimated Chinese banks' earnings growth potential.

JPMorgan recommended buying Chinese bank stocks because revenue momentum at these companies remains strong, Samuel Chen and Sunil Garg, analysts at the brokerage, wrote in a research report released today. "We would start to buy back CMB when its price is 10 percent lower."