Shanghai's benchmark stock index sprinted past the 3,000-point mark yesterday for the first time before closing just below the historic level.

It still rose enough to set a new high.

Analysts predicted the upswing will continue when the market reopens on February 26 after the week-long Spring Festival holiday, which starts on Sunday.

The Shanghai Composite Index, which tracks yuan-backed A shares and hard-currency B shares, jumped 0.18 percent to end the day at 2,998.47, the best close since the bourse started trading in 1990.

The barometer climbed to an intraday high of 3,036.35 before profit taking set in. Market watchers forecast that downward pressures won't be strong enough to offset strong investor sentiment, however.

"The 3,000 level won't be the end of the current bull market," said Chen Jinren, a Huatai Securities Co analyst. "After recent corrections, funds tended to flow back again to steady the performance of stocks that had charted heavy losses."

The Shanghai index jumped about 10 percent in January, extending a 130 percent rise in 2006. But a correction battered the market early this month, slashing the gauge by as much as 15 percent, on jitters that a bubble might be building.

To calm concerns, stock regulators last week resumed the issuance of equity-investment mutual funds after a three-month hiatus, aimed at helping soothe investor worries over a tight capital supply.

"I expect yuan shares to continue their rally in 2007 but not at last year's blistering pace and probably with more short-term setbacks," said Lu Chengde, a Guosen Securities Co trader.

"As investor demand for stocks mounts, regulators might still need to adopt measures to ward off overheating. So the uptick will be gradual."

Leading yesterday's winners was Shanghai Automotive Co, the listed unit of China's biggest automaker, whose shares jumped by the 10 percent daily trading cap to 12.83 yuan (US$1.66).

China Eastern Airlines Corp sailed 9.98 percent to 4.52 yuan while China United Telecommunications Corp inched up 0.40 percent to 5.06 yuan.

Chinese stocks often surge around the Lunar New Year holiday, in part because investors are seeking investment tools for their year-end bonuses and regulators tend to dish out supportive policies at that time.

Adding to the market optimism was the news that at least five equity mutual funds are scheduled to start sales late this month or early next month, possibly pumping 30 billion yuan into the market.

"I will buy into the mutual funds launched after the holiday," said Xu Xiaojin, a 24-year-old Shanghai-based engineer. "As the coming year will be 'the Year of the Golden Pig,' I believe investing in stocks will also bring good luck and handsome returns on the government's promises to support the market."

Chinese securities regulators said early this year that they would encourage high-quality large-cap enterprises to list domestically and pledged to beef up information disclosures, battle insider trading and promote more risk-hedging derivatives.

(Source: Shanghai Daily via chinadaily.com.cn, February 17, 2007)