China shares surged 2.15 percent on Monday amid fresh speculation about take-over deals in the steel sector. The benchmark Shanghai composite index closed at 1,648.538, within a point of its intra-day high and not far from its 2006 closing high of 1,664.088, hit on May 15.
Turnover in Shanghai A-shares was an active 29.2 billion yuan, up from 24.2 billion on Friday. "The rise in steel stocks is mainly driven by speculation about mergers in the sector, such as Mittal's bid to buy Baotou," said analyst Zhang Qi at Haitong Securities.
Top global steel maker Mittal said in December it was in talks to buy a stake in China's Baotou Iron & Steel Co Ltd.
But foreign efforts to invest in Chinese steelmakers have been on hold as regulators await the result of Mittal's bid for Arcelor, the world's second biggest maker.
A Baotou official told Reuters on Monday that he did not know any specific reason for his company's share price leap and "as far as I know, the Mittal bid has been put aside for the time being." However, Arcelor said last week that it would buy a Russian steel company as part of efforts to stave off a hostile take-over by Mittal.
Some investors were betting on Monday that if this move finally ended the Mittal-Arcelor saga, the way would be clear for major foreign investment in Chinese steel firms. Baotou Steel gained 8.86 percent to end the session at 2.58 yuan, while China's top steel maker, Baoshan Iron and Steel Co Ltd, rose 2.9 percent to 4.61 yuan.
Laiwu Steel Corp Ltd, in which Arcelor has agreed to take a 38 percent stake, rose 5.13 percent to 5.94 yuan, while rival Handan Steel Iron and Steel shot up by its daily 10 percent limit to 3.92 yuan. Handan has held talks with Arcelor and Germany's ThyssenKrupp on the possibility of selling a stake to one of them.
Yangtze Power Co Ltd bucked the positive market trend, sliding 0.56 percent to 7.04 yuan. Shares in Yangtze, operator of the Three Gorges hydroelectric dam, have fallen 13 percent since a rally on May 17, when it received the green light from regulators to issue warrants. The benchmark index has jumped 42 percent since the end of last year, buoyed by market-friendly government steps including rules to encourage greater participation by mutual funds.
Last week's announcement of the first initial public offer in a year, ending a de facto ban on new listings, is generally being taken as a positive sign of the market's health.