China Stocks Advance Most in Three Weeks; Merchants Bank Rises

By Zhang Shidong and Chua Kong Ho

July 7 (Bloomberg) -- China's stocks rose the most in almost three weeks, led by banking stocks, after China Merchants Bank Co. and China Citic Bank Corp. said first-half earnings probably more than doubled.

Merchants Bank, the country's most profitable bank, rose by the most in more than two months. Citic Bank, the banking unit of the nation's largest investment company, gained for a fourth day. Beijing North Star Co. jumped on speculation next month's Olympic Games will lure more tourists to the capital city.

``Fundamentals are very strong in China compared to any other Asian nation,'' said Liu Yang, managing director at Atlantis Investment Management Ltd. in Hong Kong, which oversees about $4 billion in assets, in a Bloomberg Television interview. ``Chinese stocks are trading at crisis valuations. Do they deserve to trade at crisis valuations? The answer is no. The market deserves a very good rebound from here.''

The CSI 300 Index, which tracks yuan-denominated A shares listed on China's two exchanges, climbed 123.43, or 4.5 percent, to 2,865.28 at the 11:30 a.m. local-time break. The increase was the most since June 18. All of the measure's 10 industry groups gained today, with just two of its 300 constituents falling.

The CSI 300 has dropped 46 percent so far this year, the second-worst performing major stock index tracked by Bloomberg, on concern rising fuel prices and inflation running at a decade- high will slow corporate earnings growth.

Merchants Bank gained 6.2 percent to 22.60 yuan, set for the biggest gain since April 24. Citic Bank rose 5.2 percent to 5.50 yuan, extending a three-day, 4.6 percent advance.

Olympic Games

Merchants Bank said first-half profit may have more than doubled as the company extended more loans while Citic Bank expected first-half profit to rise more than 150 percent on higher interest revenue.

Industrial & Commercial Bank of China Ltd., the nation's biggest listed lender, added 2.9 percent to 4.94 yuan. The company last week forecast its first-half profit to rise by more than 50 percent. China Construction Bank Corp., the country's second-largest bank, rose 4 percent to 5.94 yuan.

Beijing North Star, the city government's property arm, advanced 7.9 percent to 8.19 yuan. Beijing Urban Construction Investment & Development Co., a property developer, soared 10 percent to 13.46 yuan. Beijing Capital Co., an operator of facilities and hotels, gained 6 percent to 9.54 yuan.

``The Beijing Olympic Games have given a boost particularly to those Beijing-based companies,'' said Zhang Ling, who manages the equivalent of $1.1 billion at ICBC Credit Suisse Asset Management Co. in Beijing.

The city is expecting 1.5 million visitors, including 500,000 from overseas, 22,000 journalists, and 16,000 athletes and officials for China's first Olympics, according to official estimates.

The Shanghai Composite Index, which tracks the bigger of China's stock exchanges, rose 4 percent to 2,776.28. The Shenzhen Composite Index added 4 percent to 839.19.

The following stocks rose or fell and the stock symbols are in brackets after companies' names.

Property developers: China's government is likely to take measures to ease property developers' funding difficulties caused by loan curbs and falling sales, the Economic Observer reported over the week-end, citing a person it didn't identify.

China Vanke Co. (000002 CH), the nation's biggest listed property developer, climbed 0.45 yuan, or 5.1 percent, to 9.32, a third consecutive day of gains. Poly Real Estate Group Co. (600048 CH), China's second-largest developer by market value, surged 1.05 yuan, or 7.4 percent, to 15.17.

China Eastern Airlines Corp. (600115 CH), the nation's third-largest carrier by fleet size, jumped 0.58 yuan, or 8.7 percent, to 7.28. China Eastern agreed to sell three Airbus SAS A340s for 1.29 billion yuan ($188 million) to ICBC Financing Leasing Co, a unit of Industrial and Commercial Bank of China Ltd., and then lease them back, the airline said in a statement to Hong Kong Stock Exchange on June 4 after markets closed.

China Petroleum & Chemical Corp. (600028 CH), Asia's biggest oil refiner, also known as Sinopec, rose 0.48 yuan, or 5.1 percent, to 9.90, set for the biggest advance since June 18. Sinopec received 2.51 billion yuan in rebates on value-added taxes levied on gasoline and diesel imports in the second quarter, the Xinhua News Agency said on July 4, citing the finance ministry.

China Railway Group Ltd. (601390 CH): Asia's largest construction company, added 0.22 yuan, or 4.2 percent, to 5.48, set for the steepest gain since June 18. The company said two of its subsidiaries won orders worth 951.6 million yuan.

To contact the reporter on this story: Zhang Shidong in Shanghai at szhang5@bloomberg.net