Chinese share prices hit new high on Monday despite the fifth interest rate hike this year announced last Friday.

The Shanghai Composite Index rose 109.21 points or 2.06 percent to 5,421.39 points. The Shenzhen Component Index was up 280.67 points or 1.54 percent to 18,494.38 points.

Steel stocks and power supply companies led the advance. Shougang, one of China's largest steel companies, jumped 9.96 percent to the upper limit of the day and closed at 10.05 yuan per share. BaoSteel, rose 3.23 percent to stand at 20.44 yuan per share. Huaneng Power International, a leading company in China's power sector, gained 6.06 percent to close at 17.5 yuan per share.

The combined turnover on the two bourses reached around 256 billion yuan (US$34.1 billion), a little higher than 234.5 billion yuan on previous trading day.

Monday's stock market was typical of the first trading day after the interest rate hike, said Zhang Gang, analyst with Southwest Securities.

China has raised its benchmark interest rate five times this year and the major stock index used to open lower and close higher on the trading day following each hike announcement.

On Friday, the central bank announced rises in the one-year deposit and loan interest rates by 27 basis points to 3.87 percent and 7.29 percent respectively from September 15.

The policy was taken in a bid to curb rising inflation and tighten control over excessive liquidity when the consumer price index in August rose 6.5 percent.

Though the interest rate hike is expected to divert money from investment to deposits, the policy calmed investors who feared more bad news and they began to buy, said analysts.

Previously, the market had feared several possible scenarios that could have pulled down share prices, including an interest rate hike, the sale of state-owned shares and stock futures.

Many investors believe the Chinese stock market will remain stable until the 17th National Congress of the Communist Party of China, which is scheduled to convene in Beijing from October 15.

(Xinhua News Agency September 18, 2007)