China's stock market closed at its highest level in nearly two years yesterday following the government's lifting of a one-year ban on share sales.

A Chinese shareholder looks at an electronic stock board in Shanghai May 8, 2006.

The benchmark Shanghai composite index finished 3.95 per cent higher at 1,497.104 points, its highest level since June 7, 2004, when it ended at 1,517.145 points. And the percentage gain on the first day after the week-long May Day holiday was the biggest since June 8, 2005.

Shares in commodities, real estate and the electronic power sectors saw a continuous increase on yesterday's market. Analysts predicted the index will rise to 1,500 points in coming days.

"In the past, the rise of A shares used to be driven by the rise of H shares. But now I do not believe that the climbing of the A-share index is much related to the rise of H shares," Cheng Weiqing, an analyst with CITIC Securities, said.

A shares have been gaining in strength, buoyed by the government's series of market-friendly measures since the beginning of 2006.

The China Securities Regulatory Commission lifted the one-year ban on shares sales by issuing new rules on Sunday, saying that companies must meet 34 criteria to be eligible to sell stock, including three successive years of profit and dividend payments equal to at least 20 per cent of income.

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