This was triggered by reports that Beijing had cleared two funds to invest in overseas equities.

However, as the Hong Kong and Shanghai bourses were both closed for China's National Day holiday, that left Singapore as the only outlet with a significant number of China listings to entice the foreign funds poured in.

Interest was further ignited by last Saturday's launch of the US$200 billion (S$298.2 billion) China Investment Corp, which will invest in global financial markets. The result: China shares skyrocketedas analysts rushed out to 'buy' updates.

Two giant shipbuilders - Cosco and Yangzijiang Shipbuilding - seemed to be on everyone's buy list to the extent that they reached record highs. That boosted the market value of Cosco and Yangzijiang by $2.35 billion and $1.42 billion, respectively.

Sectors such as food and apparel, which leverage on the booming China consumer market, were also in hot demand as were those with an environmental theme such as waste-water recycling. Industries with fortunes tied to soaring crude oil prices, such as petrochemicals and alternative energy, prospered as well.

The PrimePartners China Index, which tracks China stocks in Singapore, was up 13.5 per cent at 317.96 points - this, on top of its 6.4 per cent jump last Friday.

The frenzy was whipped up by a UBS report singling out the China stocks in Singapore that would benefit once Beijing gives its fund managers the green light to invest in overseas equities.

UBS based its observations on an unconfirmed Dow Jones report that China Harvest Fund Management had been given the nod to launch a US$4 billion fund to invest in listed firms in Hong Kong, the United States and Singapore.

This further inflamed speculation already set ablaze last Friday by a Merrill Lynch report quoting the Shanghai Securities Journal, that fund manager Jiashi had been given a mandate to buy overseas-listed shares of firms that derive at least 50 per cent of their revenues in China.

UBS analyst Tan Min Lan expects China plays in Singapore - called S-shares - which trade at a sharp discount to their Hong Kong peers, to benefit from any inflow in China funds.

'The valuation disparity between S-chips and H-shares is obvious across most sectors... Significant discounts of up to 45 per cent in price-earnings ratios are seen in sectors such as retail, materials, chemicals, environment and food,' she said.

Merrill Lynch analyst Eddy Loh illustrated the powerful influence these China funds could exert. 'We estimate that US$48 billion of mainland funds will flow out by end-2008. Assuming 10 per cent flows into S-shares, this would translate to US$5 billion, or 10 per cent of the total market value of all S-shares.'

engyeow@sph.com.sg

Sectors such as food and apparel, which leverage on the China consumer market, were in hot demand, as were those with an environmental theme