The Shanghai stock market soared 5.33 percent yesterday, the largest intra-day jump for over two years, in tandem with the global market after the US central bank cut a key interest rate to help defuse the credit crisis. 

The Shanghai Composite Index jumped 248.28 points to close at 4904.85, with 831 of 901 stocks closing higher, led by large caps. Turnover on the Shanghai bourse amounted to 145.31 billion yuan. The Shenzhen Composite Index soared 4.53 percent to close at 1356.02, and the Heng Seng Index also surged 5.93 percent to close at 21595.63. 

"The global market rebound eased investors' concerns, triggering heavy buying today," said Chen Wenzhao, an analyst at Everbright Securities.

"The stock market's upward trend will stay because of its strong corporate fundamentals," he said.

"Over 70 billion yuan in mutual funds are flowing into the market through relatively low price-to-earnings ratio stocks like steel and financial companies," said Wu Feng, an analyst at TX Investment Consulting Co Ltd.

Analysts said yesterday's move to allow individuals in Tianjin Binhai to invest directly on the Hong Kong stock exchange will not trigger large outflows of capital.

"In contrast, it raises the possibility of a corresponding policy allowing overseas individuals to invest on the mainland in the near future" said Zhang Fan, an analyst at Changjiang Securities.

"The policy is not expected to have a large negative impact on mainland capital liquidity," he said.

"This move should be the beginning of a major shift to merge A- and H-share prices," said Stephen Green, an economist at Standard Chartered Bank (China) Ltd.

"It should make it a lot easier for ordinary punters to invest in H shares, which with present valuations should mean considerable bullish sentiment hitting H shares and, relatively speaking, less bullish sentiment for A shares over the next few months as the funds begin to flow," he said.

Companies in the steel sector led the increase in yesterday's trading. China's largest steelmaker Baosteel jumped to its daily limit to close at 16.23 yuan, while Wuhan Steel also jumped 9.98 percent to close at 15.21 yuan. Jinan Steel surged to its daily limit to close at 18.01 yuan. Companies in the financial, real estate and energy sectors also performed well.

(China Daily August 21, 2007)