China's shares broke through the 1,100 point mark yesterday after lingering above the psychologically-important 1,000 barrier for weeks.

The latest jump comes because investor confidence was improved by the yuan revaluation and the government's policies to allow more capital to enter the market.

The benchmark Shanghai composite index ended at 1104.038 points, the highest level since June 29, up 1.39 percent. The market is now warming up from its previous sluggishness, said Dong Chen, a senior analyst at China Securities.

Funds and Qualified Foreign Institutional Investors are chasing blue chips now the yuan has been revalued, he said.

Also, the government is reshuffling the brokerage sector and is opening the window for other capital, such as corporate pensions and insurance money, to be invested in the stock market.

This is all good news for the market and will improve confidence about its future, the analyst said.

Meanwhile, up to now 15 listed firms have held general shareholders' meetings to vote on compensation proposals related to the flotation of state-owned stocks in the companies. All these proposals were approved.

The 15 firms are among the second batch of 42 listed firms selected by the regulator to experiment with the sale of shares held by the State in the firms.

Two-thirds of shares in Chinese firms have been held by the State or legal bodies and were not tradable.

Market watchdog the China Securities Regulatory Commission (CSRC) has selected two batches of listed firms to experiment with the share restructuring.

The non-tradable shareholders have to offer compensation to their tradable shareholders because tradable shares will be affected by the sale of non-tradable stock.

The CSRC announced that there would be no third round of experiments and will push the reform into the whole market after analyzing what has happened so far.

Domestic firms cannot launch initial public offerings or additional share issuances until the reform is completed.

But a few days ago a high official at the CSRC indicated that as long as the listed firms, whose shares account for at least 60 percent of the market's value, finish the reform, new fund raising activities can be launched.

The domestic enterprises need fresh capital to expand their businesses and improve profitability, said Hua Sheng, a prominent Beijing-based economist.

It is not necessary to wait until all the 1,400 listed firms finish the reform process before opening the door to new fundraising, he said.

Also yesterday, Li Rongrong, chairman of the State-owned Assets Supervision and Administration Commission of the State Council, urged state-owned enterprises (SOE) to actively participate in the share restructuring.

Some big SOEs are being accused of offering small compensation packages to public investors.

Recently, Baosteel and China Yangtze Power increased their compensation to tradable shareholders.

(China Daily August 3, 2005)