SHANGHAI'S key equity index ended higher in morning session as strong gains in steel stocks offset the decline in the financial sector.

The Shanghai Composite Index added 0.25 percent to 3,061.74 at the 11:30am noon break.

Baoshan Iron and Steel Co advanced 2.19 percent to 7.45 yuan, leading gains in the steel sector, after its general manager said yesterday China's steel demand will remain steady next year.

Wuhan Iron and Steel Co rose 2.12 percent to 5.29 yuan.

Financial companies were weak amid tighter monetary policy outlook. A China Business News report said today the government may cut the money supply next year as it's considering a shift in monetary policy from "moderately loose" to a "sound" one.

Industrial and Commercial Bank of China fell 0.9 percent to 4.40 yuan and Bank of Communications declined 1.45 percent to 6.13 yuan.