The Shanghai Composite Index, which covers yuan-denominated A shares and hard-currency B stocks, jumped 4.74 percent to end at 2,794.70, reversing a two-session 5.6 percent loss.

The climb was the biggest since June 8, 2005, when the index climbed 8.21 percent.

"Companies in sectors including drug and beverage wooed fund inflows because of their low valuations and good earnings prospects," said Li Wenhui, a Huatai Securities Co analyst.

"Negative factors such as possible interest-rate hikes and pending massive stock sales have already been digested by the market."

Shanghai Pharmaceutical Co, the public arm of the country's No. 1 drug group, soared to the 10 percent trading limit to 9.19 yuan (US$1.18). Shanghai Industrial Pharmaceutical Investment Co also added 10 percent to 8.43 yuan.

Tsingtao Brewery Co, China's biggest beer producer, soared 10 percent to 19.54 yuan. China Life Insurance Co, the country's top insurer, also added 10 percent to 43.45 yuan.

Shanghai Bailian Group Co, the listed vehicle of China's No. 1 retailer, picked up 9.98 percent to 11.90 yuan.

Yesterday's rally underscored investor confidence despite market jitters that the central bank may further curb credit this year to damp investments and the market may face a tight liquidity as a slew of large-caps to be listed loom.

Industrial Bank kicked off its initial public offering yesterday to raise about 10 billion yuan, and analysts believe the IPO will be well received by investors and could stoke another round of interest in financial chips.

Shanghai Automotive Co, the listed unit of China's biggest car maker, jumped 10 percent to 9.54 yuan on news it would spend a further 868 million yuan in its Shanghai venture with General Motors.

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