China's main stock index surged 2.20 percent to a fresh record high finish on Monday as investors bought heavily into steel and coal companies, focusing on strong earnings prospects. The Shanghai Composite Index ended the day at 4,440.769 points, off an intra-day high of 4,450.188. Gaining stocks overwhelmed losers by 764 to 95.
Turnover in Shanghai A shares expanded to 151.7 billion yuan ($20.0 billion) from Friday's 135.9 billion yuan, but remained well below levels of around 200 billion seen during rallies in May and June.
The index has risen more than 13 percent over the past seven trading days, buoyed by the start of the first-half corporate earnings season, which has seen a wide range of companies announce better-than-expected results or preliminary estimates.
Analysts said the index would continue its uptrend if there were no government policy changes. Many traders are gunning for 4,500 points in the short term.
"The index may set new records if there are no policy changes by the authorities, even though a technical correction may occur sooner or later" given the speed of the recent rise, said Li Wenhui, analyst at Huatai Securities.
Chinese authorities' warnings against overheating of the domestic economy or asset prices are a worry, but with stock turnover still moderate compared to May and June, many traders think the government will refrain for now from further steps to cool the market.
The weakness of Wall Street is having no significant impact because foreign investment is such a small fraction of China's market, and because it is not clear that US economic weakness could be serious enough to hurt China's economy, analysts said.
The market's rise on Monday was also helped by news that authorities had approved another new A-share investment fund. Bank of Communications Schroder Fund Management Co, jointly held by Bank of Communications and Schroders, said on Monday that it would launch a stock fund on Wednesday to raise up to 12 billion yuan.
The approval of the fund was seen as a sign that the government's remained optimistic toward the stock market, since the new money will help to absorb heavy supply of shares from IPOs planned in the second half of this year. Steel stocks outperformed, with Baosteel jumping 6.98 percent to 13.49 yuan, as steel shares around the region surged on positive expectations for product prices. Stocks in the coal sector remained strong, also because of a positive industry outlook, as Datong Coal soared its 10 percent daily limit to 35.12 yuan.
Real estate stocks were hot with Vanke gaining 4.36 percent to 28.49 yuan. Poly Real Estate Group rose 1.78 percent to 69.16 yuan after saying it had signed deals to buy land in three Chinese cities for more than 6.1 billion yuan. On Friday, it soared 8.95 percent after announcing an issue of up to 350 million shares to raise money for project development.
Shanghai Auto gained just 0.59 percent to 23.98 yuan after saying it was in talks on a tie-up with much smaller rival Nanjing Auto. Analysts believe the talks could well lead eventually to joint operation of the companies' major assets, or even an outright merger, which might help develop Shanghai Auto as China's national car champion. But uncertainty over the talks, in which the two sides remain far apart, deterred major buying on Monday.
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