Chinese equities continued the upward trend of the previous trading day and gained markedly in Monday's morning session upon signs of an economic recovery, government policies to boost industries and a strong performance on the US capital market.

The Shanghai A-share index rose 34.92 points, or 1.60 percent, to close the morning session at 2,216.15, while the Shenzhen Component Index went up 260.55 points, or 3.35 percent, to 8032.44.

Combined turnover was 123.79 billion yuan (US$18.1 billion).

The mainland's stock market is expected to continue rising after advancing almost 10 percent last week, the biggest weekly gain since mid-November, analysts said.

But some warned there was a risk for investors chasing the rally as the market has risen to levels at which big firms could start profit taking.

Last week, the Shanghai Composite Index surged 9.57 percent to 2,181.24 points, its highest level since early October amid hopes that government stimulus packages on key industries would lead to an early recovery of the economy.

"We have seen the start of a new wave of rebounding, which could be one of the best investment opportunities in 2009," said Shenyin and Wanguo Securities' Qian Qimin.

The rally was and could continue to be propelled by government measures to support specific industries and improving economic data, Qian said, forecasting the index would move to between 2,150 and 2,400 this week.

China approved stimulus packages, including tax breaks and increased funding on research, on the textile and machinery industries last week, after unveiling support measures for the auto and steel sectors last month. More plans targeting other industries are expected to be announced as part of state effort to revive the economy.

Zhou Yu, an analyst at Pacific Securities, said the next major technical resistance for the Shanghai benchmark is about 2,300, adding that wide fluctuations may occur in the short term as big investors might lock up the gains to take profit.

Investors should focus on cyclical stocks which could benefit from government support policies, Zhou added.

(Xinhua News Agency February 9, 2009)