Hong Kong Chief Executive Carrie Lam is set to announce the formal withdrawal of the China extradition bill that sparked protests in the city that have lasted for months, according to reports on Wednesday.

The Hang Seng index in Hong Kong soared more than 3.5 per cent on Wednesday afternoon trade after the reports came that a controversial extradition bill is set to be withdrawn.

The protests evolved into a wider democracy campaign involving clashes between protesters and police, in the biggest challenge to China’s rule of Hong Kong since its 1997 handover from the British.

For the last three months, both Lam and Beijing have refused to make any concessions to the protesters beyond agreeing to suspend the bill, a move that fell far short of demands that it be permanently shelved.

Carrie Lam would announce a full withdrawal of the bill later in the afternoon, the South China Morning Post reported.

The speculation sparked jubilation on the stock market which has been battered by both China’s trade war with the United States and Beijing’s refusal to find a political solution to the weeks of protests in the international financial hub.

Earlier on Tuesday, Lam had rejected suggestions that China was stopping her from stepping down from her post, saying it was her choice to stay as she wanted to solve the city’s ongoing problems.

Lam’s remarks come a day after the leaking of an audio recording, suggesting that she had said in a closed-door meeting she would quit given the choice, for causing “unforgivable havoc” to the city.

“About resignation, I said on several occasions previously and also affirmed by my colleagues in the Chief Executive’s Office in response to media enquiries that throughout this period … I have never tendered resignation to the central people’s government,” Lam said.

Demonstrators have five main demands for Lam, including formally withdrawing the bill, establishing a commission of inquiry to investigate police conduct and restarting the city’s stalled political reform process.

Hong Kong has been shaken by mass protests triggered by the now-shelved extradition bill since June. Demonstrations have run for 13 consecutive weekends, and 1,117 protesters have been arrested so far.