China stocks extended gains on Tuesday to close at a near three-month high, as expectations for big flows into stock markets from pension funds continued to improve risk appetite.

The blue-chip CSI300 index rose 0.3 per cent to 3,482.82 points, while the Shanghai Composite Index added 0.4 per cent to 3,253.33 points, its highest close since December 1.

The tech-heavy start-up index ChiNex climbed 1.4 per cent to a 5-week high.

“Pension funds will be the biggest source of incremental capital in the near future, and they would surely pick shares of industry bellwethers and consequently boost the blue-chips," said Tian Weidong, a Xi'an-based analyst with Kaiyuan Securities.

Sentiment was also lifted by news that many listed companies scrapped or revised their plans for the private placement of shares, after regulators introduced policies to check "excessive” fundraising.

The new policy is widely seen as encouraging more initial public offerings to help grow investment in the economy.

More IPOs in theory would boost the demand for blue-chips, as investors have to own stocks in order to subscribe to shares in newly-listed companies, and they usually prefer blue-chips for the requirement.

Most sectors edged higher. Gains were led by real estate and material shares.

Shanghai Bailian Group rose by its 10 per cent trade limit for the second session, while Yonghui Superstores also shot up 10 per cent to a 16-month high, after Alibaba Group said it formed a strategic partnership with Bailian Group, boosting appetite for shares in listed retailers.