Continuing its strong performance over the past week, the benchmark stock indicator yesterday rose to an historic high, regaining all the ground lost since share prices fell sharply on May 30 following a hike in the tax levied on stock transactions.

The Shanghai Composite Index climbed 22.49 points, or 0.52 percent, to close at 4,346.46, up from the previous high of 4,334.92 on May 29. Turnover on the Shanghai bourse totaled 132.8 billion yuan, with 721 out of 902 stocks closing higher.

The number of new A-share accounts opened was 110,641, up from the daily average of 62,743 a week ago.

The smaller Shenzhen Composite Index rose 18.45 points, or 1.52 percent, to close at 1,231.65. The foreign-currency denominated B-share index rose 2.82 percent to close at 318.04.

The Hong Kong benchmark Hang Seng Index also surged yesterday to an all-time high of 23,557 points before plunging to close at 23,224, down 137 points from the day before.

"The uncertain factors hanging over the market, including economic data, government measures and outflow of capital, have largely been cleared and absorbed," said Zhang Yidong, an analyst at Industrial Securities.

"Investor sentiment was further boosted by better-than-expected first-half results in large-cap stocks," said Jing Ulrich, chairman of China Equities at JPMorgan Securities.

"Strong earnings results and widely expected yuan appreciation will lend support to the index at current levels," she added.

"The good results of listed companies attracted mutual funds to move their money to the stock market, as indicated by higher redemptions of mutual funds recently," said Li Maoyu, an analyst at Changjiang Securities.

Some 80 companies announced interim earnings reports on the Shanghai and Shenzhen stock exchanges by July 24. The total net profit amounted to 5.46 billion yuan, up 82.4 percent from the year earlier.

Yet Stephen Green, senior economist at Standard Chartered, warned new highs in the stock market could again raise the question of whether the economy is overheating.

"Much of the data suggests that it is growing at over-capacity, so a prudent course for the government to take would be to further raise bank interest rates. I think we're in for a bumpy ride in the next few months - and now is the time for caution among small investors," he said.

(China Daily July 27 2007)