A DAY after snapping a three-day losing streak, Shanghai stocks continued the momentum yesterday, gaining the most in two weeks, amid rising expectations that the government may take steps to spur economic growth.

The market was also buoyed by media reports that China may further delay the relaunch of new share offerings, with the key Shanghai Composite Index adding 39.11 points, or 1.95 percent, to close at 2,043.88. This was the highest reading since July 11.

"There has been mounting speculation that the government will take steps to ensure economic growth, like continuing investments in infrastructure construction. That will give a boost to the A-share market in the short term," BOC International, Bank of China's investment banking unit, said in a note yesterday.

The Shanghai Securities News yesterday quoted railway officials as saying that China plans to use investments in the high-speed railway network to soak up overcapacity in sectors such as cement and steel.

China CNR Corp Ltd, one of the country's two biggest train manufacturers, jumped 8 percent to 4.47 yuan (US$0.73). CSR Corp Ltd surged 8.1 percent to 3.86 yuan. Jinxi Axle Co Ltd, a provider of railway parts, leaped by the daily 10 percent limit to 13.37 yuan.

A separate report by Shanghai Securities News said that the securities regulator is likely to further postpone the resumption of initial public offering after IPO applicants were told to update their financial documents.

As of July 18, a total of 746 firms were awaiting the green light from the China Securities Regulatory Commission to go public on the Shanghai and Shenzhen bourses, down from a pipeline of nearly 900 after the regulator launched a campaign to crack down on false disclosures.

Lenders paced the gains by financial institutions amid mounting expectations that China may have to ease its monetary policies in the second half of the year after data showed foreign exchange purchases declined for the first time in six months.

Industrial Bank Co jumped 3.7 percent to 9.64 yuan. China Minsheng Banking Corp gained 2.6 percent to 8.64 yuan.

Gold producers sparkled among non-ferrous metal producers after gold prices increased the most in one year, hitting the highest level in one month. Shandong Gold Mining Co soared 2 percent to 22.48 yuan. Zhongjin Gold Corp added 1.5 percent to close at 9.54 yuan.