Chile shares surge to Dec 2007 high, peso down

(Recasts with bourse closing at December 2007 high)

By Alexia Vlahos

SANTIAGO, May 25 (Reuters) - Chilean shares surged on Monday to close at their highest level since December 2007, led by gains in commodity, retail and construction stocks hard hit in recent months, while the peso closed weaker, traders said.

The IPSA .IPSA blue-chip share index ended 1.35 percent higher at 3,104.50 points, preliminary closing data showed, while the all-market IGPA index .IGPA rose 1.22 percent to 14,623.61 points. The IPSA has gained over 30 percent since the start of the year.

"The market sees a recovery in the medium- to long-term for the construction and retail sectors, which were punished at the end of last year and beginning of this year," said Jorge Selaive, head of research with the BCI brokerage.

Wall Street, which often sets the tone for Chilean markets, was closed for the Memorial Day holiday.

Soquimich SQM_pb.SN, Chile's leading exporter of fertilizer and the world's biggest producer of iodine and lithium, rose 1.37 percent to 20,150 pesos per share.

Steelmaker CAP CAP.SN was the day's most heavily traded share, surging 7.39 percent to 13,155 pesos a share. Traders said they saw no fundamental reason for the gains.

Cencosud CEN.SN, one of Latin America's largest retailers, rose 3.03 percent to close at 1,444.70 pesos.