Stocks jumped 2.58 percent yesterday, led by PetroChina, widely expected to benefit from a proposed energy law allowing domestic prices of oil products to reflect market trends.
The benchmark Shanghai Composite Index rose 126.76 points to close at 5042.65, with 762 of 908 stocks closing higher. The Shenzhen Component index jumped 3.14 percent to close at 16569.81.
Turnover on the two bourses increased 35.3 percent to 114.58 billion yuan yesterday from the day before, indicating the return of bargain hunters.
PetroChina, the mainland's largest stock by capitalization, soared 2.78 percent to close at 31.44 yuan, while China's other oil giant Sinopec surged 2.92 percent to close at 22.22 yuan.
"Oil producers are expected to benefit from the proposed energy-pricing system, which will help them to respond quickly to oil price fluctuations on the international market," said Zhu Haibin, an analyst at Essence Securities.
The draft energy law, recently published to seek public opinion, proposes a market-led pricing system to allow refiners to adjust product prices according to supply and demand.
PetroChina's rebound led increases by other large-caps. The Industrial and Commercial Bank of China jumped 2.94 percent to close at 8.39 yuan, and China Aluminum surged 3.45 percent to close at 38.11 yuan.
The stock market was also encouraged by a rumor that new mutual funds will be approved for issue soon, prompting institutional investors to snap up large-caps.
An economic outlook book released by the Chinese Academy of Social Sciences on Tuesday forecast the domestic stock market will climb steadily next year, with the occasional falter.
Analysts said uncertainties still exist in the market, as investors worry about monthly economic data to be released next week.
The Ministry of Finance will issue 750 billion yuan in 15-year special treasury bonds on Tuesday, which is expected to further mop up liquidity in the market, analysts said.
"It is a technical rebound after steel and non-ferrous companies fell a lot in the past weeks," said Wu Feng, an analyst at TX Investment Consulting Co Ltd.
(China Daily December 6, 2007)
