The benchmark Shanghai composite index, grouping hard currency B shares for foreign investors and yuan-denominated A shares, finished 0.65 percent higher at 1,539.358 points, its highest close since June 18.

The Shenzhen sub-index also gained 31.31 points, or 0.92 percent, to end at 3,443.70 points.

Swiss bank UBS AG invested in four firms last week, becoming the first foreign institution to buy A shares under the landmark QFII scheme, which is aimed at prying open China's huge but restrictive stock and bond markets.

The four firms were ZTE Corp, Baoshan Iron & Steel, Sinotrans Air and Shanghai Container.

All four outperformed, with logistics provider Sinotrans one of the top gainers, up 6.79 percent at 23.28 yuan, while Baoshan Iron and Steel, the listed arm of China's largest steel maker, rose 1.09 percent to 5.57 yuan.

ZTE was up 3.4 percent at 19.98 yuan, while Shanghai Container rose 1.09 percent to 13.86 yuan.

Analysts said the quartet of so-called "QFII-concept stocks" were industry leaders and should perform well in the medium term.

They had helped the broad market rise 3.6 percent since the start of July and provided a slight boost to overall trading sentiment, analysts said.

"The market has shown a steady climb, and its upward momentum strengthened this afternoon," said analyst Dong Bin at China Securities.

"We estimate the market can maintain its upward trend in the near term."

US financial giant Citigroup Inc became on Tuesday the second foreign institution to invest in China's main stock and debt markets, though it did not name its investments. The company had invested about US$4 million.

Chinese investors are also building positions in likely QFII targets. Index heavyweight CITIC Securities, China's first brokerage to float shares, jumped 5.74 percent to 8.11 yuan, while well-known lender China Merchants Bank ended up 1.32 percent higher at 12.26 yuan.

China's yuan closed flat against the US dollar at 8.2770 yesterday, sticking to the firmer end of its rigid trading band.

The yuan was sandwiched between 8.2768 and 8.2771 throughout the session, near the stronger end of a razor-thin band of 8.2760 to 8.2800 that the central bank usually enforces.

Turnovers fell to a moderate US$640 million from US$790 million a day earlier.

Federal Reserve Chairman Alan Greenspan told US legislators that China will eventually need to float its currency, sending forward premiums on the yuan towards record highs, with the one-year non-deliverable forward dollar dealt at a discount of 1,870 points in Thursday morning trade.

But dealers shrugged off his comments, saying they did not expect any changes in the short run with a stable exchange rate system long considered a base for growth and social stability.

Central bank Governor Zhou Xiaochuan said in a report issued early this week that China would continue to "perfect" its exchange rate mechanism. One bank dealer said that meant Beijing would pay more attention to reforming the yuan regime.

The yuan is not freely convertible on capital accounts and its movements within the government-set range are decided mostly by trade and foreign investment.

On Thursday, the yuan closed firmed at 6.9906 against 100 Japanese yen from 7.0107 on Wednesday, and softened versus the euro to 9.2851 from 9.2299.

It ended one notch weaker against the Hong Kong dollar at 1.0609.

(China Daily July 18, 2003)