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China's shares rose 1.6 percent Wednesday as funds raced to build positions in big caps such as Wuhan Iron and Steel Co.

The benchmark Shanghai Composite Index finished at 1,089.909 points, after closing up 2.6 percent Tuesday.

“Funds were chasing after blue chips in the past two days,” said analyst Hu Weitao at Changjiang Securities. “They seemed to have been cheered by the yuan appreciation.”

Markets had gained 2.5 percent last Friday, after the government revalued the yuan by 2.1 percent Thursday, a move seen as boosting corporate buying power and domestic consumption.

Wuhan Iron, the country’s third-largest mill, was among the most actively traded stocks of the day. It surged 4 percent to close at 3.62 yuan (US$0.45).

China United Telecommunications Corp., the smaller of the country’s two mobile phone carriers, climbed 1.1 percent to 2.89 yuan.

Asia's largest oil refiner Sinopec Corp., rose 1.0 percent to 4.09 yuan, extending a 0.25 percent gain in the morning session.

Analysts said the market, bumping along eight-year lows in recent months, had hit the bottom and that recent gains could be the beginning of a turnaround hoped for by investors.

The major index has fallen nearly 14 percent so far this year, extending a 15 percent slump last year.