But turnover fell to HK$136.8 billion from Friday's HK$180.2 billion.

Only three out of the 50 stocks in the Hang Seng Index fell. Casino operator Sands China led the gainers, rising 4.74 per cent to a one-month high of HK$30.95.

Great Wall Motor took a hard hit after it announced plans to raise 16.8 billion yuan by selling non-listed A shares to 10 or fewer investors. The stock plunged 13.29 per cent to HK$32.95 in reaction.

Despite Monday's extension of a rebound after the recent rout, many analysts continue to be cautious.

"We think the correction on the H-share market should be limited to a further 5 per cent," said Bhaskar Laxminarayan, the chief investment officer at Pictet Wealth Management. "Any recovery is likely to be short-lived. We think the A-share market has space to fall a further 15 to 20 per cent from current levels."

The Shanghai Composite rose 2.39 per cent to 3,970.39 points, after briefly touching the psychologically important 4,000-point mark in afternoon trade.

The Shenzhen Composite rose 4.18 per cent to 2,120.25 points, while the Nasdaq-style ChiNext index jumped 5.8 per cent to 2,683.07 points.

More than 1,500 companies in Shanghai and Shenzhen were halted from trading after reaching the daily limit of 10 per cent.

Some 300 of the more than 1,300 stocks that had stopped trading last week returned to the floor as Beijing's strong market intervention seemed to restore confidence.

"Investors may still want to exercise caution on mainland [Chinese] companies. Annualised volatility for A shares is now running at over 80 per cent," said Russ Koesterich, BlackRock's chief investment strategist.

Turnover in Shanghai improved to 792.4 billion yuan from 680.4 billion yuan on Friday, but is still far below its June 8 record of 1.3 trillion yuan, fuelled by margin financing or borrowed money to buy stocks.

The margin finance balance fell to 1.4 trillion yuan last week from 2.3 trillion yuan three weeks ago, according to data compiled by Goldman Sachs.

Securities companies including Citic Securities and Guotai Junan Securities have profited handsomely from the boom in the margin financing business, blamed for the recent bull run in mainland Chinese markets before the recent turmoil.

Citic Securities on Monday said its operating revenue in the first half to June soared 195 per cent from the same period last year to 31.11 billion yuan while net profit jumped 206 per cent to 12.47 billion yuan.

Earlier in the day, Guotai Junan issued an alert, saying its net profit would rise up to 356 per cent in the first half to 9.8 billion yuan.

CSRC probes Jack Ma's Hundsun

China's securities regulator conducted an onsite check on Hundsun Technologies, a financial information technology company owned by Alibaba Group Holding founder Jack Ma Yun.

The visit by the China Securities Regulatory Commission to Hundsun's head office in Hangzhou came on the heels of the regulator's statement that it had found clues on stock market manipulation.

"Aside from checking some clues, the regulator urged all parties involved to comply with relevant rules," the CSRC said in a statement.

Hundsun links small-scale institutions such as hedge funds with brokerages through its cloud-based Homs platform. Institutions using Homs had offered margin loans worth at least 500 billion yuan to individual investors in the recent market turmoil, according to the CSRC.

Chinese media has blamed Homs for fuelling leveraged bets that pumped stock prices. In an exchange filing, Hundsun said it was not fair to blame it for the turmoil.

Daniel Ren