SYDNEY/WELLINGTON, March 7 Reuters) - Australian shares surged to a two-month high on Monday, as investors swooped on cheap stocks after months of heavy selling, and rebounding commodity prices lifted the mining sector while New Zealand stocks held near-record levels.
The S&P/ASX 200 index .AXJO gained 46.475 points to 5,136.5 by 0205 GMT, its highest intra-day level since Jan. 6, and its sixth consecutive day of gains.
After a sombre start to 2016, the benchmark rallied 4.3 percent last week, the largest weekly gain since October.
"We are witnessing an aggressive rally in underperforming stocks as opposed to strong buying in the quality names or long term, high conviction investing," said Matthew Felsman, a private wealth adviser at APP Securities Pty Ltd.
"The recent buying is likely a combination of short covering by traders and underweight fund managers chasing a few battered stocks that can be perceived to be cheap."
Resources stocks led the market higher after iron ore climbed above $52 a tonne to levels last seen in October, while copper prices climbed to their highest in four months.
The ASX 300 Metals & Mining Index .AXMM rose nearly 4 percent to its highest since November.
Fortescue Metals Group FMG.AX was the biggest gainer, up 12.6 percent to flirt with a 2016 peak, while BHP Billiton (LON:BLT) BHP.AX leapt 5 percent, while Rio Tinto (LON:RIO) RIO.AX put on 3.3 percent.
Energy stocks also firmed, with Whitehaven Coal WHC.AX up 10.7 percent and Beach Energy BPT.AX up nearly 8 percent.
Banks also gained, recovering from a sell-off that has come from concerns that the housing sector is overheated.
Commonwealth Bank of Australia CBA.AX rose 1.3 percent, Westpac Banking Corp WBC.AX and Australia and New Zealand Banking Group ANZ.AX added 1.5 percent and National Australia Bank NAB.AX is up 2 percent.
Law firm Slater & Gordon SGH.AX clawed back 7 percent after intense selling, that has seen its market capitalisation slump, since a series of profit warnings began last year.
New Zealand's benchmark S&P/NZX 50 index .NZ50 was flat after hitting record levels.
The index was up 0.1 percent or 3.7 points at 6,421.83 during the morning trading, after hitting a record high of 6,426.57 on Monday.
The biggest gainers were Heartland Bank HBL.NZ , which rose up 1.71 percent and A2 Milk ATM.NZ which is up 1.67 percent. Health software company Orion Health Group OHE.NZ gained 1.2 percent.
Casino operator Sky City SKC.NZ lost 0.88 percent and Sky TV SKT.NZ fell 0.90 percent.
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