Shares in the finance, pharmaceutical and food industries led the growth. All banks, insurance companies and securities houses listed on the two bourses, except CITIC Securities, went up today. Agricultural shares also performed well.

B shares fell. Of the 109 B-shares listed on the exchanges, only 24 were up and six flat. Changchai saw a perfect 10 percent rise to lead the few growing stocks. Closed-end funds were up, with both the fund indices of the two markets surging more than 2 percent.

Stock and fund investment has become Chinese people's favorite way to manage their assets, according to a survey by the central bank, based on 20,000 samples collected in 50 cities.

Of the surveyed, 40.2 percent said stocks and fund investment are their first choice, up from the 30.3 percent in the first quarter. To the contrast, the proportion of people willing to deposit in banks declined to 26.3 percent from 30.3 percent in the first quarter, the lowest result in six years.

The China Securities Regulatory Commission (CSRC) said yesterday that eligible financial firms will get licenses as qualified domestic institutional investors (QDII) starting July 5. The scheme has so far been limited to banks and insurers. Now securities and fund-management firms will be allowed to invest overseas in a move seen as cooling the overheated mainland stock market.

The news has prompted up the Hong Kong stock market. Hong Kong's Hang Seng Index (HSI) hit another record high yesterday. It rose 101 points, or 0.47 percent, to close at an all-time high of 21,684.

Mainland company indicator China Enterprises Index climbed to 12,138 in the morning session, before closing at 11,905, gaining 38.7 points, or 0.33 percent. PetroChina and China Mobile went up 5.2 percent and 0.06 percent, settling at HK$11.74 and HK$80.4.

Analysts said the market was stimulated by impending A-share floats and reports that the Hong Kong government is studying ways to narrow the discrepancy between A- and H-share prices.

The central bank's Shanghai headquarters yesterday issued a report warning investors to prevent market risks caused by changing expectations. The report on Shanghai's financial stability for 2007 points out that excessive liquidity is a concrete manifestation of China's economic imbalance, and that the price of equities showed a marked increase in 2006.

Concerns about an overheated economy grew sharply among Chinese entrepreneurs and bankers in the second quarter, according to the People's Bank of China surveys. More bankers expected further tightening measures including interest rate hikes in the second half of the year.

Fourteen percent of 5,635 entrepreneurs expressed concern that the economy, which hit its highest point since the first quarter of 1994, was expanding too quickly. The entrepreneurs' confidence index fell to 83.4 percent, the lowest level in two years. The index was 87.1 percent in the same period last year and 88.5 percent in the first quarter this year.

The entrepreneurs surveyed said they think the economy will continue to overheat in the third quarter, with the overheating expectation sub-index hitting a record high of 8.6 percent.

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