SHANGHAI stocks extended four days of gains today to a seven-week high as investors are optimistic about China's economic reform and market liquidity.

The benchmark Shanghai Composite Index advanced 0.75 percent to 2,299.99 points, the highest close since March 27. Daily turnover was 128.8 billion yuan (US$21.1 billion).

"The A-share market sentiment has been boosted by the government intention to deepen economic reform, the delay of initial public offerings and rising expectations that housing market control may be relaxed," said Zhang Yanbing, an analyst at Zheshang Securities Co.

Ample market liquidity also gave a boost to market valuation as hot money is flowing into China after foreign central banks cut their interest rates, according to Tebon Securities.

Data from the broker showed that hot money inflows have reached 884.9 billion yuan since the beginning of this year, a big rebound from an outflow of 1.67 trillion yuan last year.

IT firms led the market gains. NARI Technology Development Ltd Co surged 6.1 percent to 23.51 yuan. Fiberhome Telecommunication Technologies Co advanced 3.7 percent to 35.17 yuan.

Brokerages increased after data from China Securities Investor Protection Fund Corporation showed a net inflow of 20 billion yuan to A-share accounts in the first ten days of May, ending a continuous outflow since April.

CITIC Securities, China's biggest listed brokerage, rose 1.2 percent to 12.94 yuan. Haitong Securities Co added 1.4 percent to 11.53 yuan. Everbright Securities surged 3.9 percent to 13.95 yuan.