SHANGHAI stocks rose for the third straight day, sending the index above the 2,000 level, as gains among pharmaceutical sector and medical devices outweighed the decline of financials.

The key Shanghai Composite Index rose 11.32 points, or 0.57 percent, to 2,006.56. Turnover was 74 billion yuan (US$12.1 billion) by the end of trading.

Market watchers said investors have shifted their focus to the performance of listed companies that are scheduled to release half-year reports in July and August.

"Some growth stocks with upbeat earnings reports may perform against the weak fundamentals including the ongoing liquidity squeeze and a weaker-than-expected economic recovery," Galaxy Securities said in a weekly report.

The gross profit of 939 firms listed on the Shanghai and Shenzhen bourses is expected to grow 0.73 percent in the second quarter from a quarter earlier, according to calculation by the Shanghai Securities News based on performance forecasts released by the companies.

Drug makers were among the biggest gainers. Zhejiang Huahai Pharmaceutical Co surged 9 percent to 17 yuan. Tianjin Zhongxin Pharmaceutical Group Corp Ltd advanced 6.4 percent to 13.99 yuan.

Shinva Medical Instrument Co gained among medical device manufacturers, rising 4 percent to 46.74 yuan. Industrial Securities expected the company to post a profit growth of over 40 percent in 2014 after acquiring Shanghai Uniwin Pharmaceutical Machinery Co.

Most lenders continued a weak run even through borrowing costs in the interbank market fell further with the overnight repurchase rate dropping 67 basis points to 3.79 percent in Shanghai today.

Industrial Bank Co decreased 2.3 percent to 14.28 yuan. China Minsheng Banking Corp declined 1.3 percent to 8.48 yuan.