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SHARES in Shanghai closed 1.84 percent higher yesterday in the first trading day of May after a rally of metal and airline chips.
The Shanghai Composite Index, which tracks yuan-denominated A shares and hard-currency B shares, gained 1.84 percent, or 67.90 points, to 3,761.01.
Gainers in the Shanghai market outnumbered losers 760 to 37, while six were unchanged.
The Shenzhen Composite Index, which tracks the smaller domestic stock exchange, was up 2.94 percent, or 32.24 points, to 1,130.
Combined turnover on the two bourses stood at 212.07 billion yuan (US$30.29 billion), slightly lower than the 225.47 billion yuan of the previous trading day.
"The trade volume is still at a high level (over 200 billion yuan) and that means the buyers have strong confidence," said Qin Hong, an analyst at Bohai Investment Research Institute.
In April, Shanghai's stock index dropped to around 3,000, half of the peak in October. The government decreased the stamp duty fee by two-thirds, which triggered a market rebound.
"The rebound will continue based on the trade volume index," Qin said.
Metal firms led the rally on the back of surging prices for raw materials.
Zhongjin Gold, China's third-largest producer of the precious metal, gained the 10 percent daily limit to 65.54 yuan. Shandong Gold, the second-biggest bullion producer, rose 10 percent to 130.90 yuan. Yunnan Copper, China's third-largest smelter of the metal, gained 4.66 percent to 29.20 yuan. Western Mining Co, China's second-largest producer of lead concentrate, gained 7.28 percent to 26.23 yuan.
Airlines gained as a result of falling jet-fuel prices.
China Eastern Airlines Corp, the nation's third-largest carrier, surged the daily limit to 11.79 yuan. China Southern Airlines Co, the nation's biggest airline, jumped 10 percent to 13.92 yuan while Air China also rose 10 percent to 16.31 yuan.
Carriers have also benefited from the yuan's 4.3 percent appreciation this year as it reduces the value of dollar-denominated debt.
The market rose after concerns eased that new equity offers and trading of previously locked-up shares will create a glut.
"The market conditions haven't changed and the firms' profitability has worsened in the first quarter. That will bring uncertainty," said Wu Youhui, an analyst at GF Securities. Wu said he expected the index would face corrections soon.
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