Sufficient liquidity and hopes of early recovery in economic fundaments sent the benchmark Shanghai Composite Index up 83.22 points to 2181.24, its highest level in five months.

An investor in Wuhan smiles when the stock benchmark index rose nearly 4 percent, February 6, 2009. [China Daily]

Heavyweights led the rally and only one stock ended up lower at the end of the day.

The smaller Shenzhen Component Index went up 4.84 percent to 7771.9 points. Following active trading the day before, the combined turnover on the two bourses reached 189.2 billion yuan yesterday.

The Shanghai index has gained 9.57 percent over the first week after the Chinese New Year break.

"The absence of negative economic figures in February and high expectations on pickup of residential consumption data during the past holiday lifted investors' hopes that China will recover earlier than other economies," said Zhang Fan, an analyst with Tebon Securities.

He forecasted two rounds of interest rate cuts in the first half of this year, 27 basis points each time.

China International Capital Corporation estimated the newly added loans in the bank system reached 1.4 trillion to 1.6 trillion yuan in January, up almost 20 percent from the first month in 2008, indicating an abundant supply of capital.

Recent speculations that China Securities Regulatory Commission will resume initial public offerings in the short-term, which caused panic short-selling on Thursday, was clarified by the securities regulator, backing up market liquidity, said analysts.

The non-ferrous metals and property sectors were at the forefront of yesterday's rally.

Non-ferrous metal shares rose 7.37 percent. Western Mining, the second-largest lead miner in China, climbed 8.02 percent to 9.07 yuan, while Zhongjin Gold Corp, the biggest producer of precious metals, jumped 7.84 percent to 42.91 yuan.

"Chinese base metal industries show signs of strengthening after being squeezed by slumping demand and aggressive de-stocking for several months," said Jing Ulrich, managing director, China Equities, J.P. Morgan.

The property sector finally revived after a long slide, on hopes the central government will announce plans to stimulate the realty industry.

Vanke, China's largest listed property developer, gained 7.71 percent to close at 7.82 yuan.

(China Daily 02/07/2009 page5)