SHANGHAI Baosteel Group Corp has invested 2 billion yuan (US$247 million) in a share buyback from Baoshan Iron and Steel. The move is to bolster shares of its Shanghai-listed unit after the state-owned share sale.

Baosteel, China's biggest and most profitable steelmaker, made purchases on August 25 and on Wednesday in an aim to defend its price, Baoshan Steel said in a filing to the Shanghai Stock Exchange yesterday.

Baosteel Group said in August it would spend 2 billion yuan to buy back public shares if the price fell below 4.53 yuan in the two months after all the stock was converted into tradable shares on August 18.

Baosteel promised not to sell the shares until April 15, 2006.

Another 2 billion yuan has also been designated to boost shares if they remain under the level in the six months from October 18.

Baoshan Steel's shares have been below 4.53 yuan since September.

"Baosteel may find it in vain to support prices even if Baosteel invests all the 4 billion yuan," Yong Zhiqiang, a Haitong Securities Co analyst, said. "Investors are bearish on the stock market and steel sector."

The listed unit's shares have slumped 28 percent this year, more than the 8.4 percent decline in the benchmark Shanghai composite index, as oversupply prompts steel prices to decline.

It is also worried China's steel sector will suffer from oversupply and a price drop, Yong said. Baoshan Steel said last month it will cut prices to match rivals.

A slowdown in investment growth already occurred in the first half. Profits in China's steel sector gained 40 percent to 76.8 billion yuan in the first six months.

The growth was 52 percentage points lower than in the same period in 2004.

Baosteel is among 46 companies in a trial program to cut state holdings valued at US$250 billion.

Baoshan Steel decreased 2.48 percent to 4.32 yuan yesterday.