The rally comes after a jump of 0.9 percent last Friday after the securities watchdog lifted the ban on new listings.

As of yesterday, the major gauge has jumped over 59 percent since the beginning of 2009.

"New issues are back in favor as the market sentiment has picked up," said Wu Feng, analyst, TX Investment Consulting Co Ltd, adding that the increasing share supply can be bolstered further by the large capital inflows.

The resumption of IPOs is also a long-term stimulus for China's macro economy as it permits cash-strapped enterprises' to access funds from the capital market, said Zhang Fan, senior analyst, Changjiang Securities.

Zhang suggested that the regulator should utilize technical adjustments to check the possible market fluctuations.

"The decision to transfer part of State-owned companies' shares to pension funds can be justified as a measure to stabilize the market," Zhang said.

The Ministry of Finance and the China Securities Regulatory Commission announced on Friday that companies must transfer the equivalent of 10 percent of their shares sold in IPOs on domestic stock markets to the national pension fund to increase assets to the welfare system.

This year's scheduled release of a total of 690.6 billion non-tradable shares is four folds more than in 2008. The transfer of State-owned firms' shares, which will prolong the lock-up period for another three years, will therefore alleviate investors' rising concerns on new scrip floods, Wu said.

But most shares in brokerage and medical sectors dropped yesterday after a drastic advance last Friday triggered by Guilin Sanjin's upcoming listing.

Three out of four listed brokers sank yesterday, led by Haitong Securities, which dropped 1.81 percent.

Only seven stocks out of 93 medical companies trading yesterday closed higher after out performing last week on the HINI epidemic and their peer Guilin Sanjin's share float.

(China Daily June 23, 2009)