BEIJING, June 2 -- Shanghai shares yesterday jumped to a record high in over 2 years, led by the steel sector on market talk that Baoshan Iron & Steel Co will acquire Handan Iron & Steel Co Ltd.

    An analyst said the index may tap 1,700 in coming sessions as this round of correction would end pretty soon.

    The Shanghai Composite Index, which groups both yuan-denominated A shares and foreign-currency B shares, rose 2.61 percent to 1,684.19. This beat the record on May 16 when the index hit 1,678.6 which was the highest since May 2004.

    "This week's gain signals that the index will pick up again soon," said Zhang Qi, an analyst at Haitong Securities Co.

    The index has climbed 4.4 percent so far this week after losing nearly 5 percent since the second trading week of May.

    The Shanghai index has surged over 40 percent since January with banking, agriculture and non-ferrous counters highly sought after.

    The A share index gained 2.62 percent to 1,769.56 and the B share index added 1.86 percent to 98.06.

    Steelmakers advanced yesterday led by Handan Steel on media reports that it would possibly be acquired by Baoshan Steel, China's largest steelmaker.

    As a whole, the steel sector rose 2.88 percent yesterday.

    Handan Steel Co Ltd, the biggest gainer, jumped 7.78 percent to 4.85 yuan (60 US cents). The Hebei Province-based steelmaker has gained 36 percent this week led by the takeover speculation.

    It said in a statement yesterday that Baosteel group already has over 5 percent of its shares.

    Baoshan Steel added 0.68 percent to 4.47 yuan.

    Elsewhere, Citic Securities Co, China's largest publicly traded broker, was among the top big-cap gainers when it surged 9.97 percent to 16.76 yuan, followed by Shanghai Automotive Industry Corp's 9.92 percent gain to 5.32 yuan.