An 8% surge in Chinese mainland equities helped Asian markets have a bullish start to the week Monday, as all the major indices followed the country's largest one-day surge since April 2005.

The Shanghai Composite Index leaped 351 points to 4672, while the Hang Seng jumped 908 points, or 3.8%, to 25,032, making a close above the psychologically crucial 25,000 level for the first time in a week. In Japan, the Nikkei rose 362 points, or 2.7%, to 13,859.

"The market is so sold-off, especially for China, and emerging market volatility is very, very high," says Kit Wong, an analyst for Harris-Fraser in Hong Kong. "The fundamentals are still very good, and this recent technical correction is not a problem for long-term investors. There have been no fundamental changes."

Chinese shares rose after reports that the local securities regulator has approved two new closed-end mutual funds, which are rumored to be raising up to 14 billion yuan ($1.9 billion) for investment in domestic equities.

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Leading the charge on the mainland was

Aluminum Corp. of China

(ACH) - Get Report

, which soared the maximum daily limit allowed of 10%, to 32.34 yuan, after an announcement Friday that the company and

Alcoa

(AA) - Get Report

paid $14 billion for a 12% stake in miner

Rio Tinto

(ACH) - Get Report

.China's sovereign wealth fund

China Investment Corp.

has now agreed to provide up to $120 billion if the company seeks a full acquisition.

China Investment also announced that it may team up with state-owned

China Shenhua Energy

(CUAEF)

to make a bid for around 16% of Australian iron ore giant

Fortescue

(FSUMF)

in a deal worth around $2 billion.

Shares in China Shenhua added 8.6% to 61.62 yuan. Other commodity giants followed in the big gains.

PetroChina

(PTR) - Get Report

surged 8.1% to 26.39 yuan, while

Sinopec Shanghai Petrochemical

(SHI) - Get Report

gained 5% to 13.02 yuan, after losing as much as 7% of its value last week in snowstorm jitters.

Financials on the mainland also powered ahead.

Bank of China

(BACHF)

rose 6.9% to 5.71 yuan, and

Industrial & Commercial Bank of China

(IDCBF)

jumped 7.4% to 7.23 yuan.

In Hong Kong trading, coal producers

Yanzhou Coal

(YZC)

and

China Coal

(CCOZF)

rose as reports of supply disruptions in China, South Africa and Australia sent prices higher. Yanzhou Coal was 7% higher at HK$14.26, while China Coal rose 6.4%, to HK$19.60.

Mainland insurance stocks got an uplift after reports of damage caused by the snowstorm last week are now said to have been exaggerated.

Ping An

(PIAIF)

climbed 11.7% to HK$62.30, while

China Life Insurance

(LFC) - Get Report

advanced 9.3% to HK$32.25. Dealers said that they may become heavy buyers of China Life in the event of a further 5% decline in the price of stock this week.

Telcos also saw gains.

China Mobile

(CHL) - Get Report

rose 4.9% to HK$123.40, and

China Telecom

(CHA) - Get Report

ended 3.6% higher at HK$6.03.

Alibaba.com

( ALBCF) soared 13.6% to HK$20.35, following

Microsoft's

(MSFT) - Get Report

offer for

Yahoo!

(YHOO)

on Friday, since Yahoo! owns a stake in the Chinese company.

Although many dealers are still wary of Chinese tech shares, some anticipate further rises if more positive news in the sector appears in the U.S. On Friday,

Baidu.com

(BIDU) - Get Report

failed to catch the sector's momentum, and rumors circulated that investors may use the 3.7% losses as a buying excuse following China's gains.

Not all market participants are convinced of the bullish longevity of mainland shares, however. Sean Darby, head of strategy for Nomura in Hong Kong, says that the Fed's deep cutting may have negative side effects on mainland Chinese shares, while having the reverse effect on shares in Hong Kong.

"The absence of coordinated easing will hamper Asian equity rallies. Last week's 50 basis point

Federal Reserve

rate cut to 3% will create substantial policy problems for China as interest rate differentials narrow, adding pressure on the renminbi to appreciate," Darby wrote in a research note.

Darby recommends buying an inflation-protected basket of stocks, including plays like

CNOOC

(CEO) - Get Report

and Japanese precious metals producer

Matsuda Sangyo

(MTSYF)

.

In Japan, shares in

Yahoo! Japan

(YAHOF)

also rose as a result of the Microsoft bid, since the company is one-third-owned by the U.S. company. Yahoo! Japan rose 9.5% to 46,000 yen.

Other exporters gained mildly after the yen weakened to 106.96 against the dollar from 106.49 previously.

Sony

(SNE) - Get Report

inched up 0.6% to 4,820 yen, and

Canon

(CAJ) - Get Report

added 0.7% to 4,620 yen.

Kobe Steel

(KBSTY)

gained 4% to 363 yen.

Other Asian markets followed in the buying. In India, the Bombay Sensitive Index rose 417 points, or 2.3%, to 18,660. The South Korean Kospi finished 56 points, or 3.4% higher, at 1690, and in Taiwan the Taiex gained 152 points, or 2%, to 7673.

Daniel M. Harrison is a business journalist specialising in European and emerging markets, in particular Asia. He has an MBA from BI, Norway and a blog at

www.theglobalperspective.biz

. He lives in New York.