Led by the heavy industry sector, China's major stock index yesterday jumped 2.2 percent to a new record high of 4,440.77.

According to the latest statistics from the Ministry of Finance, State-owned enterprises posted a 31.5 percent profit growth to 753.5 billion yuan in the first half of this year. Among them, steel companies had the biggest jump with 116 percent profit growth, followed by the petroleum & chemical sector with 95 percent and the machinery sector with 73.6 percent.

Analysts said China's stock market, so far untouched by the latest global market tremors, is expected to continue the upward trend because of the sound corporate earnings. But they warned the ripple effect from the global market downturn could hit in the near term.

The Shanghai Composite Index rose 95.41 points, with 756 out of 902 stocks closing higher. The turnover on the bourse amounted to 153.5 billion yuan.

The number of new A-share accounts opened on Friday was 133,009, the highest in July.

The smaller Shenzhen Composite Index was up 2.29 percent, or 28.48 points, to close at 1274.93 yesterday.

"Investors have begun to increase their holdings of blue-chip companies, such as stocks in real estate, steel and airline sectors, which have a huge potential of profit growth," said Zhang Fan at Tebon Securities.

"The global market tremor is expected to spread to China after a temporary upward performance of the Chinese stock market triggered by sound corporate earnings," said Wu Yiping, an analyst at Haitong Securities.

"The stock market is expected to climb slower in the short term because of the negative psychological impact the global market plunge would have on investor sentiment," said Zhu Haibin, an analyst at Essence Securities.

Nicholas Kwan, regional head of research in Asia at Standard Chartered, said the current correction is a short and normal pre-landing turbulence for markets to move to a healthier growth path.

"Reduced investor exuberance or a fall in risk appetite should allow for a healthier adjustment of markets and the broader economy going forward," he said.

Steel stocks led the rally in yesterday's trading. Angang Steel Co Ltd surged 9.86 percent to close at 24.39 yuan, while Wuhan Iron and Steel Co Ltd jumped 7.08 percent to 12.56 yuan.

(China Daily July 31 2007)