The blue-chip Hang Seng Index reached 19,725.73, adding 405 points in a single day.

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Hong Kong-listed mainland companies also hit a record high, with profitable State-owned enterprises seen to be the biggest beneficiaries of the upcoming tax policy.

The index of Hong Kong-listed mainland companies, known as the H-share index, hit a five-year high when it closed at 10,258.31 yesterday, up nearly 7 per cent.

The day's turnover in H-share companies topped HK$28 billion (US$3.6 billion), soaring 19 per cent compared with last Friday's HK$23.6 billion (US$3.6 billion).

The mainland's tax authorities plan to abandon preferential treatment designed to attract foreign investors and set a unified corporate income tax rate of 25 per cent, which will significantly cut costs for local firms currently paying up to 33 per cent in income tax.

The unified tax policy came earlier than expected, which is good news, especially for big and profitable State-owned enterprises, as their income base is higher, and they will enjoy larger cost reductions, said an stock analyst who wished to remain anonymous.

He expected the blue chip index to climb further to a 300-point-range around 19,600 through January 2007.

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