For years, China's stock market was an anomaly: the economy was going one way up and it was going in the opposite direction.

This year, it seems it can't wait to catch up gaining a staggering 94 per cent and becoming one of the best performing markets in the world in 2006 mainly because of successful security reforms.

A man is seen beside an electronic board at a stock exchange in Nanjing, east China's Jiangsu province December 14, 2006. China's benchmark stock index rose 0.99 percent to an all-time high on Thursday, boosted by big new inflows of funds into the market from local and foreign investors. The Chinese characters on the electronic board read "Be careful to access stock market since it is of risk". [Reuters]

Yesterday, the market hit a historic high: the benchmark Shanghai Composite Index rose 1.15 per cent to close at 2249 points, passing the previous intra-day high of 2245 on June 14, 2001.

Turnover of Shanghai A shares was a heavy 36.88 billion yuan (US$4.67 billion).

The Shenzhen Composite Index yesterday closed at 6044.28 points, up 71.80 points from the previous day. It has more than doubled since the beginning of this year.

"Factors like the steadily growing economy, a series of reforms in the capital market, and massive capital inflows into the mainland will see the stock market embracing a 'golden decade'," said a report in Shanghai-based Orient Securities. "The index is expected to break 3000 points in 2007," it added.

In May last year, the central government embarked on an ambitious reform to convert non-tradable shares worth as much as US$250 billion to tradable ones.

"Now for the first time, the stock market is able to reflect China's booming economy. It proves the ongoing securities reform has fundamentally changed the stock market from a gambling house to a normally functioning market based on true value", said Li Yongsen, a professor at Renmin University of China.

With the bulls clearly on the ascendant, analysts point out that massive inflows of new money into the market make it hard to foresee when the rally will stop.

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