Goldman Sachs' forecasted a potential surge of up to 40% for Chinese shares if the country introduces reforms for corporate governance, dividend distributions and institutional ownership. The bullish outlook follows UBS' upgrade on Chinese stocks to overweight, citing competent corporate earnings and fiscal support as the major factors for the upgraded index.

Adding to the positive sentiment is the China Securities Regulatory Commission's commitment to expanding the stock connect cross-border investment scheme in Hong Kong, a step in boosting the city's status as an international financial center.

Global investors have increased their allocation to China, dialling back their bearish bets on the market, while cutting exposures to Taiwan and India, according to HSBC Holdings.

At closing bell, the benchmark Hang Seng Index jumped 83.27 points, or 0.48%, to 17,284.54. The Hang Seng China Enterprises Index added 20.15 points, or 0.33%, to 6,120.37.

Among blue chips, Property developer China Overseas Land and Investment jumped 6.3% to HK$12.90 after posting a surprise 22% increase in operating profit in the first quarter. Hong Kong Exchanges and Clearing added 3.3% to HK$246.80, rising for a second day after profit for the first three months exceeded estimates.

CK Asset Holdings added 1.6% to HK$32.75, CK Infrastructure Holdings gained 0.7% to HK$44.65, and Power Assets Holdings climbed 1.7% to HK$45.65 after three listed units forming a consortium to acquire the largest natural gas network operator in Northern Ireland..

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