After a plunge last week, China shares reach an 18-month high on Monday, January 15, 2007, with transportation companies and heavyweight financial firms driving the benchmark Shanghai Composite index to its best single-day performance in the past one and a half years. The index jumped 4.74 percent, or 126.59 points, to 2794.70, rebounding from a two-session 5.6 percent slump on Friday, amid renewed interest in financial and transport shares.

The performance ranked as the biggest gain in a single day since June 8, 2005, when the index rose 8.2 percent. Gains were centered in banks and financial shares with China Mobile rising a limit-up 10 percent. Today's rally underscored investor confidence despite market jitters that the central bank may further curb credit this year to dampen investments and the market may face tight liquidity as the slew of large-cap floaters are looming. Industrial Bank kicked off its initial public offer today with an aim to raise about 10 billion yuan, an issue analysts believe will be well received by investors and could stoke another round of tallies in financial plays. Airlines stocks and other transport companies also gained after mainland authorities reduced fuel prices starting Sunday to reflect the slide in international oil prices. Air China rose 4.3 percent to 7.07 yuan and China Eastern Airlines ended 3.5 percent higher at 4.19 yuan. Shanghai Bashi (Bus) Industrial Group jumped 5.5 percent to 4.58 yuan and Dazhong Transportation Group soared 9.7 percent to 8.26 yuan. Both are Shanghai-based bus operators.

"Though the overall market surged today on bargain hunting, I remain cautious as most stocks have been overvalued after sharp gains in the second half of 2006," said a securities analyst in Shanghai. Analysts said there's still room for China to take similar steps in the future as local oil prices are kept higher than international levels by government controls. In currency dealings, dollar weakness pushed the yuan to its highest level since the current trading system was set up in July 2005.

The Shenzhen Composite Index on China's smaller exchange rose 5.3 percent to 631.35. on Monday.

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