Chinese share prices have jumped by 36 percent in the past five months, helped by efforts to revitalize its capital market and improved investor confidence at home and abroad.

Stock markets closed about four percent up on Monday with major indices boosted by strong performance of the Hong Kong stock market and foreign bourses over the past week, during which Hong Kong's Hang Seng index reached a five-year high.

The composite stock index on the Shanghai Stock Exchange, which comprises yuan-denominated A shares and foreign-currency B shares, closed at 1,497.1 points, up by 56.8 points, or 3.95 percent, with a total turnover of 29.6 billion yuan (3.7 billion U.S. dollars).

The index was 36 percent up from 1,098.32 points on December 8. Meanwhile, the major index of Shenzhen Stock Exchange, the Shenzhen component index, closed 4.3 percent up at 4,015.79 points, with a total turnover of 16.8 billion yuan. It was up 49 percent from 2,691.45 points on December 8.

On Monday, the share prices of bellwethers Sinopec and Yangtze Hydroelectric Co. rose by 7.4 percent and 8.18 percent, respectively, while real estate giant G-Wanke rose 9.95 percent, spurring the average share prices of real estate firms to rise by 6.89 percent.

Qin Hong, a securities analyst with Tianding Securities Consultancy Co., said the A share market on the Chinese mainland had entered a bullish market cycle as indicated by the rises of the stock markets after the central bank announced an interest rate hike late April.

Analysts attributed the strong growth to the efforts made by the government since last May to overhaul the country's capital market.

The efforts include the state share reform, and other administrative and legislative moves to regulate the market and increase investment into the market, including overseas investment through qualified foreign institutional investors.

Performance on Chinese stock markets had been lackluster from 2001 to 2004 mostly due to the split share structure set up in early 1990s when the country was in a transition from the planned to the market economy.

The split share structure refers to the existence of a large volume of non-tradable state and legal personal shares and the fact that only about one-third of the shares in domestically listed companies are floated on the markets.

Such an irrational structure has put the public investors at a disadvantage to the actual controllers of the listed companies in making corporate policies and disposing of profits and assets.

The structural problem, together with poor corporate governance and the lack of a stringent legal framework to protect minority stockholders, were blamed for the lackluster stock markets during the four years, despite nearly 10 percent annual economic growth.

The ongoing state share reform, which was designed to make all the shares tradable through compensation of roughly 30 percent by the majority stockholders to public minority holders for the right to float their non-tradable shares, is expected to be completed by the end of this year.

The government also revised its Corporate Law and Securities Law last year to regulate its capital market, while implementing a package of measures to improve corporate governance and crack down on irregularities.

Long Yun, an analyst with Hexun Information Consultancy Co., said the continuous rises of Hong Kong and other global stock markets in the past few years, partly contributed to the bullish Chinese market.

Rising prices of non-ferrous metal futures on international markets in recent months helped boost the share prices of Chinese resources firms listed domestically, which turned out to be one of the major engines for the growth of the major indices.

Share prices of resources companies, such as gold mining firms, doubled during the past year.

Long Yun said the share prices of Chinese stock markets would continue to rise in the short term as the 1,500 point level was not the limit, although fluctuation of the indices might be imminent.

Source: Xinhua