Asian equities had the starring role among global financial markets yesterday, with China's Shanghai Composite and South Korea's Kospi indexes hitting new highs.

With equity markets in the US and much of Europe closed for public holidays, the focus was on Asia, where investors continued to pour money into Chinese stocks in spite of Beijing's recent efforts to take some of the heat out of the economy.

The Shanghai Composite ended 2.2 per cent higher at 4,272.111, having hit an intraday record of 4,283.930. China's CSI 300 Index rose above 4000 for the first time.

The benchmark, which tracks renminbi-denominated A shares listed on China's two exchanges, closed 2.2 per cent higher at 4072.58. Turnover in Shanghai A shares totalled a record Rmb251.8bn ($32.9bn), exceeding the May 9 total of Rmb250.6bn9.

However, Qing Wang, strategist at Morgan Stanley, warned: “As the A-share market continues to rise rapidly despite historically high valuations, fears of serious consequences from a potential burst of the stock market bubble have intensified greatly in recent weeks.”

However he said a correction of as much as 30 per cent would have only a moderate effect on consumption and that the impact on banks' balance sheets would be “significant, but manageable”.

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