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DATE/ AUTHOR None	AUTHORS: David Barboza

H China Stocks, Rising Steeply, Test New Highs

S1 After another feverish day of buying in this country's amazing bull run, share prices in China broke records again Wednesday, sending the benchmark Shanghai composite index past the 4,000-point level for the first time.

S2 On a day when share prices also rallied in Hong Kong and in the southern city of Shenzhen, the Shanghai index closed at 4,013.09, up 1.6 percent.

S3 ''Here we go,'' said Stephen Green, a longtime stock market analyst working here for Standard Chartered Bank.
S4 ''Next stop: 5,000.''

S5 Share prices have already risen 50 percent in Shanghai this year, after gains of 130 percent in 2006.
S6 And in just over four months, the Shenzhen composite index is up 100 percent this year.

S7 The striking advances are again raising concerns about the possibility of government intervention in a market that is wasting no time rewriting the record books.

S8 But the authorities in Beijing are facing difficult choices: does it make sense to puncture a frenzied market at a time when investors are more eager than ever to invest in equities, or do nothing and allow the index to race up 1,000 points further?

S9 Just two years ago, this market was nearly asleep, with the Shanghai composite index hovering around 1,200.
S10 The country's other major stock barometer, in Shenzhen, was even more depressed.

S11 But for the last 18 months or so, Chinese stock prices have soared , luring a nation of savers who are now finding few better places to put their money to work than in stocks.

S12 Analysts say the market has also been buoyed by new regulations, rising corporate profits and a softening real estate market in 2006, which made stocks an attractive alternative.

S13 These days, people wait in long lines outside banks and brokerage houses to open accounts, and they crowd into small rooms to spend the day watching stock monitors.
S14 They are retirees, college students taking out loans to invest in hot stocks, and homeowners who say they have sold apartments to buy shares of China Mobile or Sinopec.

S15 On the most fevered days, Chinese investors are opening hundreds of thousands of accounts, according to the state-run news media.
S16 Some publicly listed companies are said to be raising money from the market, only to plow it back into stocks in the hope of earning even better returns.

S17 Mr. Green at Standard Chartered says price-to-earnings ratios, perhaps the best-known measure of the value of a stock, are extremely high in Shanghai.

S18 The government could take moderate steps to slow this growth.
S19 But officials worry about bursting a bubble and setting off waves of selling.

S20 ''The risk of Beijing intervening between now and 5,000 is high,'' Mr. Green said.
S21 ''The question is when.''

S22 Government officials have also sounded warnings about ''blind optimism'' in the market, overzealous buying and a resulting stock market bubble.
S23 They are also concerned about stock scams, deceptive mutual fund practices and insider trading.

S24 Perhaps the biggest test came on Feb. 27, when share prices plummeted nearly 9 percent in Shanghai, the biggest one-day drop in a decade, helping to spread a global stock sell-off.

S25 But investors rushed back into the market, pushing the Shanghai composite index past 3,000 again in March, and now, slightly more than two months later, all the way up to 4,000.

S26 Share prices in Hong Kong have also been buoyed by huge initial public offerings of Chinese companies.
S27 The benchmark Hang Seng index there closed at 20,844.78 on Wednesday, just below its record high.

S28 Chang Chun, professor of finance at the China Europe International Business School, questions whether corporate profits, which may be high, are high enough to justify the current levels of stock prices.

S29 ''Earnings have gone up a lot in the last year,'' he says.
S30 ''But this market is up a bit too high.''

