SHANGHAI stocks closed higher yesterday for a second straight trading day after the money market rate fell as a liquidity crunch eased, despite China's manufacturing sector expanding more slowly in June.

The Shanghai Composite Index rose 0.81 percent to 1,995.24.

The seven-day repurchase, or repo, rate, a gauge of interbank funding cost, fell 74 basis points to 5.42 percent in Shanghai yesterday, compared with a record high of 11 percent on June 20, data from the National Interbank Funding Center showed.

The overnight rate fell by 48.5 basis points to 4.46 percent, down from 13.4 percent on June 20.

"The liquidity pressure is easing as indicated by the falling interbank funding rates after the central bank injected cash to selected lenders and seasonal factors weighing on liquidity have passed," Zhang Yanbing, analyst with Zheshang Securities, said yesterday.

Data from the National Bureau of Statistics revealed China's Official Purchasing Managers' Index, a gauge of manufacturing activity slanted toward state-owned firms, fell to 50.1 in June from 50.8 in May. A reading over 50 signals growing factory activity. The HSBC Holdings PLC said the HSBC China PMI, which measures factory activity in private and export-oriented firms, fell to a nine-month low of 48.2, from 49.2 in May.

Zhejiang Daily Media Group Co rose by the 10 percent daily cap to 23.73 yuan (US$3.87).