SHANGHAI stocks advanced for a second straight day after the money-market rate declined, a sign of an easing of the recent liquidity crunch, despite data showing China's manufacturing sector expanded at a slower pace in June.

The key Shanghai Composite Index added 16.04 points, or 0.81 percent, to 1,995.24. Daily turnover was 62.7 billion yuan (US$10.3 billion).

The seven-day repurchase rate, a gauge of interbank funding costs, fell 74 basis points to 5.4 percent in Shanghai today, 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, data showed.

"The liquidity pressure is easing as indicated by the falling interbank funding rates after the central bank injected cash into selected lenders, and seasonal factors that weighed on liquidity have passed," Zhang Yanbing, analyst with Zheshang Securities, said in a report today.

Changjiang Securities said the market also rebounded after recent rounds of selling made the market oversold in the short term.

The market advanced against dismal data from the National Bureau of Statistics showing China's official Purchasing Managers' Index, a gauge of manufacturing activity slanted more toward state-owned firms, fell to 50.1 in June from 50.8 in the previous month. A reading over 50 indicates expansion.

Also, HSBC Holdings PLC revealed that the HSBC China PMI, which measures manufacturing activity in private and export-oriented firms, dropped to a 9-month low of 48.2, down from 49.2 in May.

Media firms gained the most. Zhe Jiang Daily Media Group Co surged by the daily limit of 10 percent to 23.73 yuan. China South Publishing & Media Group Co leaped 9.5 percent to 10.18 yuan. Chinese Universe Publishing and Media Co climbed 5.9 percent to 18.06 yuan.