Beijing, Aug 10 (IANS): Chinese shares rallied on Monday with the benchmark Shanghai Composite Index up 4.92 percent to close at 3,928.41 points.

The smaller Shenzhen Component Index gained 4.31 percent to close at 13,302.96 points, Xinhua reported.

The ChiNext Index, tracking China's Nasdaq-style board of growth enterprises, surged 5.03 percent to end at 2,706.72 points.

The shares rallied with major indices surging during the morning session due to strong market expectations for the reform of state-owned companies.

The strong performance may be linked to high market expectations over the reform of state-owned enterprises (SOE).

Media reports said China's central authority has approved an ambitious plan to reorganise its SOEs to improve their competitiveness in an increasingly liberalized market.

Listed companies of Chinese SOEs rallied. Shipbuilder and aircraft manufacturer shares led the rise. China CSSC Holdings Ltd., a leading ship maker, jumped by the daily 10-percent limit.