China's shares closed slightly higher yesterday after two days of falls, with Baosteel outperforming after posting solid net profits.

The benchmark Shanghai composite index, grouping hard currency B shares for foreigners and yuan-denominated A shares, edged up 0.17 per cent to 1,498.485 points. The index had shed a combined 3 per cent over Friday and Monday on talk of a crackdown on market corruption.

The Shenzhen sub-index also gained 5.76 points, or 0.17 per cent, to finish at 3,328.89.

Baoshan Iron and Steel Co, the world's fourth most valuable steel maker, said second-quarter net profit had nearly tripled on demand from the booming car and construction industries.

Its A shares closed up 0.92 per cent at 5.50 yuan, having risen 33 per cent since the start of 2003, buoyed by expectations of a strong corporate performance.

Baosteel said it would build a 3 billion yuan (US$362.5 million) plant with Japan's Nippon Steel Corp to make thin steel plates for luxury cars, solidifying its lead in the domestic market.

But persistent worries of government probes into rampant irregularities have weighed on shares this year.

State media yesterday tried to reassure jittery investors, with reports quoting an official of the State Asset Management Commission as denying speculation it was drafting rules to allow huge amounts of State-owned shares to float on domestic markets.

"Those media reports helped trigger a mild rebound," said analyst Chen Zijian at Qinghai Securities.

"But a series of negative rumours made investors reluctant to build heavy positions, limiting the extent of the rebound."

Analysts said they expected the Shanghai composite index to move narrowly around the key 1,500-point level in the near term.

Investors also remained wary during the peak corporate reporting season.

More than 1,200 listed companies are required to report first-half earnings before August 31.

In the foreign exchanges market, China's yuan fell two notches versus the US dollar to close at an intraday low of 8.2770 yesterday, sticking to the stronger end of its managed trading range.

The yuan was moving narrowly near the stronger end of a razor-thin band of 8.2760 to 8.2800 that the central bank usually enforces, touching an intraday high of 8.2768 - Monday's close.

Turnover rose to US$510 million from a moderate US$480 million on Monday.

Yesterday, the yuan firmed to 6.9394 against 100 Japanese yen from 6.9922 on Monday, but softened versus the euro to 9.3712 from 9.3335. It strengthened slightly against the Hong Kong dollar to 1.0612.

In the futures market, Shanghai copper futures slipped yesterday as the London Metal Exchange remained weak in inter-office trade after losing ground in the overnight session, traders said.

The most active December 2003 contract declined 110 yuan to 17,520 yuan (US$2,116) per ton, while other contracts dipped by 30 yuan to 150 yuan.

Combined volume rose to an active 62,328 lots from Monday's 46,508 lots.

LME three-month copper stood at US$1,701/US$1,704 a ton in yesterday's Asian trade with investors disappointed after Monday's kerb close of US$1,702, down US$18 from a day earlier, traders said.

"LME posted a big fall last night and that's why Shanghai opened lower today. Some investors got out of the market as the LME failed to hold the US$1,720 level," said a domestic trader.

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