Confidence is strengthening in the Chinese market after two days of gains of more than 1 percent.

The Shanghai Composite Index rose 1.04 percent to end at 2154.92 on Monday, spurred by the rally in regional markets and China's plans to introduce the employee share scheme. Turnover was 30 percent higher than that of the previous session.

China's stock regulator is considering a scheme under which listed companies can buy back shares and use them pay up to 30 percent of wages and bonuses for staff, its latest move to help boost the country's sagging stock market.

In draft rules published over the weekend, the China Securities Regulatory Commission said the shares issued to staff would have to be bought on the secondary market, which would support stock prices, and staff must hold the shares for at least 36 months.

Market Factors:

Loss-making companies' (known as ST, or Special Treatment) shares may rise after the Shanghai Stock Exchange said it will will adjust plans for the risk warning board, especially the controversial 1 percent upside limit, but 5 percent downside limit, which some analysts have called too harsh.

Stocks to Watch:

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