Industrial & Commercial Bank of China (ICBC) , the country's biggest bank, was up 2.37 percent at 3.89 yuan at midday. ICBC listed simultaneously in Shanghai and Hong Kong late last month.

"Growing confidence in China's economy pushed banking stocks up again today, and consequently the broad market," said Zheng Weigang, senior analyst at Shanghai Securities.

Another heavyweight blue chip, Sinopec Corp, Asia's largest oil refiner, added 3.84 percent to 7.58 yuan.

Steel stocks were also strong following recent domestic media reports that prices of iron ore, the key raw material for steel manufacturing, were likely to fall next year, boosting steel makers' bottom lines.

Top steel producer Baoshan Iron and Steel Co rose 2.5 percent to 6.55 yuan, its highest intraday level since February 2005.

Although some analysts have been warning that the market may have risen too fast in the short term, and could therefore be vulnerable to a sudden burst of profit-taking, traders said the wall of money entering the market meant calling even a short-term peak very difficult.

Money leaving the bond market to be invested in stocks pushed bond prices down significantly on Monday morning, with the Shanghai exchange government bond index slipping 0.08 percent to 111.507.

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