SHANGHAI stocks snapped out of a three-day funk to close higher yesterday, boosted by emerging industries amid optimism over China's economic restructuring.

The benchmark Shanghai Composite Index rose 12.11 points, or 0.61 percent, to close at 2,004.76.

"The market was in a bullish mood over China's policies to promote reform and innovation, which would benefit growth shares," said Shenyin Wanguo Securities.

Environment protection firms, media companies and IT giants were among the biggest gainers.

CITIC Securities said in a report that China's latest move to scrap controls on lending rates will have limited impact on company profitability and market liquidity in the short term.

"China may have to shift policy priorities from risk prevention to ensure economic stability in the second half of the year in order to avoid a hard landing," the broker said. "That means more policy support for certain sectors may be unveiled as the country pursues economic restructuring."

China has unveiled a raft of measures over the past two weeks, including policies to boost the environment protection industry, encourage information-related consumption and reduce administrative barriers for the media sector.

Beijing Capital Co, a firm specializing in wastewater disposal, jumped 5.4 percent to 6.42 yuan. Tianjin Capital Environmental Protection Group Co surged 6 percent to 7.77 yuan.

Northern United Publishing & Media (Group) Co Ltd rose 6.5 percent to 7.04 yuan. Zhe Jiang Daily Media Group Co gained 3.1 percent to 32.81 yuan.