After the long Spring Festival break, the Shanghai stock market resumed its upward trend yesterday, sending the key indicator up 1.4 percent to a record high of 3,041 points.

Investors monitor stock market performance at a trading house in Yichang, Central China's Hubei Province. The Shanghai Composite Index rose 1.4 percent yesterday to close at 3,041 points. [China Daily]

This was the first time the index had closed past the 3,000-point barrier.

The Shanghai Composite Index, the most widely watched indicator of the mainland stock market, rose 42 points, with 728 stocks of the 907 closing higher.

Turnover on the Shanghai Stock Exchange amounted to 91 billion yuan, slightly less than the 94 billion yuan on February 16 before the market closed for the holiday.

Stocks in the non-ferrous metals sector rose the most, nearly all of them up yesterday. Jiangxi Copper and Yunnan Copper surged to their daily limits to close at 17.7 yuan and 18.3 yuan respectively, encouraged by strong international copper commodity prices. Yunnan Aluminum, which posted a 122 percent growth in net profit for 2006, surged 6 percent to close at 16 yuan.

Companies in the steel industry also performed well. Baotou Steel jumped to its daily limit to close at 5 yuan. Baosteel, the largest iron and steelmaker in China, surged 8 percent to close at 10 yuan. "Investors are turning to steel stocks, which they consider to be undervalued," said Zhang Yidong, an analyst at Industrial Securities.

Analysts said the rally yesterday was partly influenced by the strong performance on international stock markets, which continued to grow during Spring Festival. And good results at many major listed companies in 2006 further boosted the booming Chinese market.

A total of 157 companies on the Shanghai and Shenzhen stock exchanges released their annual reports before Spring Festival, showing a 110 percent increase in aggregate profit from 2005.

"The surging profits of listed companies set the foundation for continuous growth in 2007," said Chen Zhou, a fund manager from Guotai Fund Management.

But analysts warned the market could face another correction after the National People's Congress and the Chinese People's Political Consultative Conference, which will be held in early March.

"The excess liquidity that has been driving the rally could be absorbed by the gathering pace in the conversion of non-tradable shares to tradable shares in April after the conference," said Zhang.

Stocks in the banking sector dropped yesterday in response to a hike in the bank reserve ratio. China Merchants Bank dived 5.6 percent to close at 17 yuan and Shanghai Pudong Development Bank, 5 percent. China Life, which made its debut on the Shanghai Stock Exchange on January 9 with an offer price of 37 yuan, slipped 1.5 percent to close at 37.25 yuan. The Industrial and Commercial Bank of China, the nation's biggest lender, dropped 1 percent to close at 5.1 yuan.

Analysts said the 0.5 of a percentage point hike, which is expected to take only 160 billion yuan out of the stock market, will not greatly influence the stock market.

"This is just a run-of-the-mill adjustment aimed at mopping up the monthly inflows from the strong trade surplus," said Jonathan Anderson, managing director of UBS Investment Research. "This is not something investors should spend any time worrying about."

Many third-generation concept stocks jumped yesterday on widespread expectation that the technology will be licensed soon. Eastcom, the largest listed company in the mobile communications sector, rose to its daily limit to close at 6.6 yuan. China Unicom rose 7 percent to close at 5.4 yuan.

"Many communication companies have been preparing for the introduction of the technology once the licenses are issued," said Zhang.

And some listed companies carrying out asset injection activities will continue to attract a lot of investment, analysts said.

Editor: Yan