China's shares rose to their highest level since late 2004 yesterday, with the metal, power and construction sectors enjoying big gains.

 

Mining companies also gained due to the continuing rise of global metal prices.

 

The benchmark Shanghai Composite Index, breaking Monday's record, gained 0.8 percent to finish at 1,329.80. It was the index's highest record since December 9, 2004, when it closed at 1,338.81.

 

"Nonferrous metals shares increased greatly on Monday and Tuesday and that is mainly because of the influence of global metal prices," Wang Qianming, an analyst with CITIC Securities said.

 

Wang had earlier predicted that shares in metal firms would climb over the next two or three years.

 

The New York Mercantile Exchange saw copper prices rise to new highs on Monday and gold prices hit a 25-year high on the exchange.

 

Afterwards, Shenzhen Zhongjin Linnan Nonferrous Metal's A shares jumped 7.6 percent to 13.29 yuan (US$1.64) and Hunan Zhuye Torch Metals' A shares surged 8.8 percent to 4.83 yuan (59.6 US cents).

 

Xiamen Tungsten's A shares rose 7.0 percent to 22.00 yuan (US$2.71).

 

The shares are expected to remain strong in the coming sessions. However, analysts could not agree on whether the benchmark index will rise to the 1,350-point level within the week.

 

Leading investment bank JP Morgan Securities said on Monday that China's A shares are ready to rebound due to the friendly macro-economic environment, as well as a revived stock market that can genuinely reflect the country's economy.

 

"Foreign investors were increasing their confidence in China's A-share market as the country's economy witness sustainable development.

 

"Foreign investors widely believe that the ongoing securities reform is going to be successful," Gong Fangxiong, director of JP Morgan's China research department said.

 

Companies that both list yuan-denominated A shares in Chinese mainland and H shares in Hong Kong also rose strongly yesterday after Hong Kong shares hit a five-year high on Monday.

 

The news agency Reuters said that fresh money was flowing into the Hong Kong stock market to bet on further yuan rises.

 

This money may flow into domestic markets, too.

 

Shenzhen Expressway's A shares hit the 10 percent upside daily trading limit to close at 3.41 yuan (42 US cents).

 

Maanshan Iron & Steel's A shares rose 3 percent to 2.43 yuan (30 US cents) and Sinopec Yizheng Chemical Fibre's A shares gained 2.4 percent to finish at 3.82 yuan (47.2 US cents).

 

The three companies also list H shares in Hong Kong.

 

Rumours suggest that China will resume IPO (initial public offerings) on the A-share market around May.

 

China suspended the launch of IPOs last May when the government started reforms of non-tradable shares.

 

China is in the process of converting about US$210 billion of non-tradable shares, mostly State-held equity, into common stock that can be bought and sold on the exchanges.

 

(China Daily April 5, 2006)