Mainland stocks entered a so-called bull market as a rally for commodity producers and automakers on improving earnings prospects drove the benchmark index to the highest level in five months.

The Shanghai Composite Index rallied for a third day as the country's shares caught up with regional measures after a weeklong holiday. The index rose 1.2 percent to 2841.41 on Tuesday, led by energy and metal producers.

Yanzhou Coal Mining Co and Jiangxi Copper Co both advanced at or near their upper limit of 10 percent on all of the last three trading days. The MSCI Asia Pacific Materials Index tracking commodity producers rose 4.5 percent when the market was closed for the holiday. Banks dropped on Tuesday after reports China acted to rein in lending to cool its economy.

"The index may rise to 3000 in the foreseeable future," said Li Jun, a strategist at Central China Securities Holdings Co in Shanghai. "Should the market digest possible forthcoming real-estate tightening measures and increased supply of new stocks in coming months, we'll definitely be in a bull market."

The Shanghai gauge has gained 20 percent from the 2010 low on July 5, surpassing the threshold some investors consider the beginning of a bull market. It entered a bear market in May after the government introduced measures to rein in real-estate prices and cut the annual new lending target by 22 percent this year.

Commodity producers have also rallied the past three days on speculation possible US economic measures will weaken the dollar and make commodities more attractive investments.

Measures of energy and material stocks have respectively jumped 19 percent and 13 percent this month, as the best two performers among the 10 industry groups in the CSI 300. The CSI 300 Index advanced 1.3 percent to 3172.73 on Tuesday, adding to a three-day 8.1 percent rally.

Yanzhou Coal Mining Co, the listed unit of China's fourth-biggest coal miner, surged the maximum 10 percent for a third day. Yanzhou Coal was among the top picks for China's coal stocks because of low valuations and the outlook for further quantitative easing measures by global central banks, Shenyin & Wanguo Securities Co said in a note on Monday.

Chongqing Changan Automobile Co, the partner of Ford Motor Co and Mazda Motor Corp, added 4.6 percent on Tuesday.

The market's rebound from the July low reflects improved prospects for the nation's economy and speculation the yuan will strengthen. China's manufacturing expanded at the fastest pace in four months in September, while industrial output rose 13.9 percent in August, exceeding economists' estimates. Citing the economy's outlook, Moody's Investors Service on Friday put the nation's debt rating on review for a possible upgrade.

Hang Seng declines

Hong Kong's stock index fell on Tuesday, ending six days of gains.

The Hang Seng Index dropped 0.37 percent to 23121.70 on Tuesday. The Hang Seng China Enterprises Index of H shares of mainland companies rose 0.21 percent to 12979 on Tuesday.