Stocks in Hong Kong soared nearly 4% on Wednesday afternoon trade following reports that a controversial extradition bill is set to be withdrawn.

By the market close, the Hang Seng index had jumped 3.9% to 26,523.23, paring some gains after surging as high as more than 4% earlier.

Hong Kong leader Carrie Lam will reportedly announce the withdrawal of a contentious extradition bill that has sparked months of mass protests and dampened investor sentiment. Its full withdrawal is one of five demands that protesters have been fighting for.

According to the South China Morning Post and other local media reports, Lam is due to make the announcement on Wednesday. CNBC sources confirmed that Lam will be calling for an urgent meeting with pro-Beijing supporters on Wednesday, but the agenda has not been confirmed.

Shares of companies that have come under the spotlight amid the turmoil in Hong Kong also skyrocketed following those reports.

Railway operator MTR, which has been hit by disruptions in its operations and damage to its infrastructure, jumped 6.4%. Embattled airliner Cathay Pacific also saw its shares surge 7.21%, with the firm's CEO stepping down in mid-August amid heavy political pressure from Beijing after one of its pilots was found to have taken part in the ongoing protests in Hong Kong.