By Chao Deng

Stocks in Shanghai rose to their highest level since July 2011 on Tuesday, while Australia rebounded on a recovery in oil prices.

The Shanghai Composite Index rallied late in the day to close up 3.1% at 2763.54 as investors bought brokerage stocks and banks. Tuesday's rise was the Shanghai Composite's biggest percentage point gain since Sept. 9, 2013, when it jumped 3.4%.

Of 19 listed brokerages, 10 hit their 10% daily upside limit. Analysts expect them to profit as trading volumes and the balance of lending to investors for margin trading pick up with a new link to Hong Kong drawing capital from global investors. Leverage ratios are also expected to rise as Chinese regulators ease controls on financing channels for brokerages.

Bank stocks also rallied as investors bet on further monetary easing. Official data Monday showed a worse-than-expected slowdown in China's manufacturing activity. China Minsheng Banking Corp. and Bank of Communications rose by the 10% daily upper limit to 10.01 yuan and 9.96 yuan, respectively. Bank of China added 5.3% to 3.56 yuan.

"Institutional investors are in a hurry to increase their positions in blue-chip stocks, such as financial companies," said Huang Cendong, an analyst at Sinolink Securities, adding a moderate consolidation will likely follow.

In Australia, the S&P/ASX 200 rose 1.4% to 5281.3 after an overnight rebound in oil prices. Benchmark U.S. oil prices on the New York Mercantile Exchange surged 4.3% to $69 a barrel, the largest percentage gain in more than two years in a rally that snapped four sessions of losses.

BHP Billiton Ltd., which fell to a 5 1/2 -year low Monday, helped drive the market with a gain of 3.9%. Rio Tinto added 2.2%, OZ Minerals rose 5.4% and Newcrest increased 7.7%. The same energy sector stocks knocked 3.6% off Australia's benchmark in the last two trading sessions, when investors worried that a sustained drop in oil prices would weigh on the bottom line of the country's oil producers.

Late in Asia, crude oil was roughly flat at $68.99 a barrel.

The Nikkei Stock Average gained 0.4% to 17,663.22, its third straight increase, even though Moody's Investors Service downgraded Japan's credit rating by one-notch late Monday. The market got a lift from the U.S. dollar, which rose 0.5% to 118.86 against the Japanese yen.

Amy Li and Robb Stewart contributed to this article.

Write to Chao Deng at Chao.Deng@wsj.com

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