China's major stock index jumped 2.7 percent yesterday as investor confidence was boosted by sound corporate interim earnings and expected further capital injections into the market.

Analysts said investors were excited by the prospect of renewed liquidity, with about 80 billion yuan from mutual funds expected to soon flow into the market.

The Shanghai Composite Index surged 113.64 points to close at 4,323.97, with 827 out of 902 stocks closing higher. The turnover on the Shanghai bourse totaled 125.68 billion yuan, down 11.25 percent from 141.62 billion yuan on Tuesday.

The number of new A-share accounts opened on Tuesday increased to 115,659, compared to the daily average of 62,743 a week ago.

The smaller Shenzhen Composite Index rose 2.41 percent, or 28.57 points, to close at 1,213.19. The foreign-currency denominated B-share index rose 3.54 percent to close at 309.32.

"The sound results of listed companies in the first half of this year further lowered the price-to-earnings ratio of stocks, which was within investor expectations," said Li Huiyong, an analyst at Shenyin Wanguo Securities.

By July 23 some 61 companies announced interim earnings reports on both the Shanghai and Shenzhen stock exchanges. The total net profits amounted to 4.41 billion yuan, up 82.95 percent over the same period last year.

"The quick expansion of in the scale of mutual funds is also a key factor supporting the market to go upward," said Deng Hongguang, an analyst at Orient Securities.

"New mutual funds are expected to enter the market in July, which has cleared liquidity tightening worries among investors," he added.

Zhang Fan, an analyst at Tebon Securities, said that the increasing levels of stock investment by insurance companies will also ensure plentiful liquidity in the market.

According to the statistics released by China Insurance Regulatory Commission, stock investment now accounts for 11.76 percent of the total assets of insurance companies.

"We expect the stock market will continue the upward trend in next several weeks as investors keep high sentiments," said Deng.

Stocks in financial sectors performed well in yesterday's trading.

(China Daily July 26 2007)