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China's shares closed 3 per cent higher yesterday, buoyed by a fresh buying spree in drug counters on news that the country plans to start testing a SARS (severe acute respiratory syndrome) vaccine on humans by the end of the year, brokers said.
The benchmark Shanghai composite index, grouping hard-currency B shares for foreigners and yuan-denominated A shares, jumped 3.12 per cent to 1,404.008 points.
The Shenzhen market surged 86.98 to 3,275.48.
B shares also gained grounds. Shanghai's B shares rose 1.53 to 112.01. Shenzhen's B shares climbed up 5.82 to 269.24.
China was likely to test a vaccine against SARS by December after pre-clinical trials on monkeys had finished, the Xinhua News Agency reported on Sunday.
Investors expected strong demand for the vaccine if human tests proved successful, helping shore up sentiment on oversold pharmaceutical stocks, brokers said.
Injection and pill maker Shandong Xinhua Pharmaceutical Co Ltd surged its daily limit of 10 per cent to 6.58 yuan (79 US cents) on talk it had participated in the vaccine research.
SARS, which reared its head in southern China late last year, killed about 350 people in the country and infected more than 5,000. It infected more than 8,000 people worldwide.
China remains vigilant against a potential re-emergence of the disease. It says there have been no SARS cases since the last patient was discharged from hospital on August 16.
Topfond Pharmaceutical, Tianmu Pharmaceutical and Tianjin Zhongxin Pharmaceutical also rose their 10 per cent limits to 5.34 yuan (64 US cents), 5.58 yuan (67 US cents) and 9.20 yuan (US$1.1), respectively.
"Drug plays were the focus, following tech plays in recent sessions, as investors continued to seek hot stocks to boost market sentiment," said analyst Song Huaisong of Fujian Xingye Securities.
"Investor confidence is likely to recover if these hot stocks can sustain gains over the long term," he added.
Some tech stocks yesterday continued to rise after leading a technical rebound of the broader market last week.
SVA Electron Co Ltd was one of the day's most active counters, soaring 9.98 per cent to 9.59 yuan (US$1.16), while Hunan TV & Broadcast Intermediary Industry Co Ltd jumped 8.13 per cent to 12.23 yuan (US$1.47).
Analysts said the market was likely to stage a wider technical rebound, which started late last week, after the Shanghai index breached resistance at the psychologically important 1,400 points.
On the foreign exchange market, China's yuan ended one notch weaker versus the US dollar at 8.2771, but remained at the stronger end of its managed trading range.
Turnover fell to US$660 million yesterday from UD$970 million on Friday. The yuan softened to 7.5995 against 100 Japanese yen from 7.5973 and weakened versus the euro to 9.8588 from 9.8479.
On the futures market, Shanghai copper futures eked out gains yesterday as the market consolidated after last week's losses and found support from news that Australian miner WMC Resources Ltd was lowering output, traders said.
Shanghai's most active June copper contract remained unchanged at 20,580 yuan (US$2,486) a ton, while most others closed up between 10 (US$1.2) and 40 yuan (US$4.8). Volume dropped by almost a third to 118,112 lots from Friday's 306,752 lots.
"Heavy selling by funds really hit the market last week, but by Friday, we were seeing a fundamental change in market sentiment which I think has carried through to this week," one Shanghai trader said.
"LME (London Metal Exchange) hasn't managed to break back through the US$1,980 barrier today, but looking forward, we are soon going to be seeing a real stabilization in the market and there is undoubtedly potential for future upside," he added.
LME three-month copper was quoted at US$1,974/US$1,978 a ton by 0400 GMT in yesterday's Asian trade, up from a kerb close of US$1,971 on Friday, buoyed by news that WMC would be cutting output over the coming weeks due to a plant failure, traders said.


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