SHANGHAI, July 27 (Reuters) - China stocks recouped early losses and edged higher on Thursday, aided by a strong bounce in start-ups as investors hunted for bargains after small caps were mauled last week.
The blue-chip CSI300 index rose 0.2 percent to 3,712.19 points, while the Shanghai Composite Index added 0.1 percent to 3,249.78.
Investors largely shrugged off data showing earnings for China's industrial firms surged 19.1 percent in June, the fastest pace in three months, despite higher financing costs.
A solid showing had been expected after recent figures showed stronger-than-expected economic growth in the second quarter, while some industrials have posted positive profit warnings.
On Thursday, prices of coal and other resource stocks saw corrections.
"While there was a sharp correction in resources and other cyclical shares that had seen a strong rally in the past months, the rotation into firms with solid fundamentals and low valuations is expected to last for a long time," said Xu Wei, analyst with Hongxin Securities.
Xu said MSCI's decision to include China stocks in an index and other developments are encouraging investors to give more attention to fundamentals than speculative factors.
The tech-heavy start-up board ChiNext, which has been sliding, jumped 3.6 percent in its best day in 14 months.
However, traders expect a general retreat from start-ups will not end soon amid falling profits at leading tech firms and worries over the fast pace of initial public offerings.
Sector performance was mixed.
Material and energy shares led the declines.
Transports gained ground, aided by a surge in Ningbo Port, which leapt 9.5 percent on speculation of a bay area development near Hangzhou. (Reporting by Luoyan Liu and John Ruwitch; Editing by Kim Coghill)