China Stocks Gain on Crude Oil's Decline; Merchants Bank Rises

By Zhang Shidong

July 24 (Bloomberg) -- China's stocks rose for the first time in three days, led by financial companies, on speculation a retreat in crude-oil prices will ease pressure on the central bank to restrict lending to slow inflation.

China Merchants Bank Co., the nation's biggest dual-currency credit-card issuer, and China Vanke Co., the country's biggest listed property developer, led the gain.

``The drop in oil prices has boosted the expectation that the economy will improve and offered some reasonable incentive to buy stocks,'' said Yan Ji, an investment manager at HSBC Jintrust Fund Management Co. in Shanghai, which manages the equivalent of about $850 million. ``The broader market may be fluttering at this level but a substantial rally doesn't seem likely.''

The CSI 300 Index, which tracks yuan-denominated A shares listed on China's two exchanges, gained 30.90, or 1.1 percent, to 2,914.22 at the 11:30 a.m. local-time break. Three stocks rose for each that fell on the 300-member measure. The measure lost 1 percent over the past two days.

The CSI 300 has dropped 45 percent this year, the worst performer among the world's top 20 benchmark indexes tracked by Bloomberg, on concern consumer prices will damp earnings growth.

The central bank this year ordered lenders to set aside a record amount in reserve to tame inflation after raising interest rates six times in 2007. Inflation climbed to 7.9 percent in the first half of this year, compared with 4.8 percent for all of 2007, government figures show.

Financial Stocks

A measure tracking financial companies advanced 2 percent today, the most among the CSI 300's 10 industry groups.

Merchants Bank rose 2.8 percent to 24.75 yuan. Shanghai Pudong Development Bank Co., the Chinese partner of Citigroup Inc., added 2.7 percent to 22.50 yuan. China Minsheng Banking Corp., the nation's first privately owned bank, climbed 1.7 percent to 6.16 yuan.

Vanke climbed 2.9 percent to 8.96 yuan. Poly Real Estate Group Co., China's second-largest developer by market value, advanced 5.1 percent to 16.15 yuan.

Oil fell 3.1 percent to $124.44 a barrel in New York yesterday, dropping below $125 for the first time in six weeks, after a U.S. government report showed that fuel stockpiles increased as consumption tumbled to the lowest in more than a year.

The Shanghai Composite Index, which tracks the bigger of China's stock exchanges, gained 0.8 percent to 2,859.60. The Shenzhen Composite Index rose 0.9 percent to 853.69.

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

China Construction Bank Corp. (601939 CH), the country's second-largest bank, added 0.06 yuan, or 1 percent, to 6.07. The bank denied a report that it holds $7 billion of securities linked to Fannie Mae and Freddie Mac, China Securities Journal reported.

Guangdong Midea Electric Appliances Co. (000527 CH), China's second-biggest publicly traded appliance maker, lost 0.35 yuan, or 2.8 percent, to 12.38. Midea said it won approval from the China Securities Regulatory Commission to raise 3.56 billion yuan ($521 million) in an additional share offering.

Minmetals Development Co. (600058 CH), a unit of China's biggest state-owned metals trader, gained 1.41 yuan, or 5.9 percent, to 25.38, set for the biggest advance since July 7. The company said first-half profit more than tripled on acquisitions, increased sales and higher margins.

Sichuan Hongda Chemical Industry Co. (600331 CH), China's third-largest zinc producer, rose 0.42 yuan, or 3.3 percent, to 13.17. The company said first-half income fell by more than 98 percent because of the May 12 earthquake and lower metal prices.

Weichai Power Co. (000338 CH), a maker of high-speed heavy- duty diesel engines, advanced 1.41 yuan, or 3.2 percent, to 45.32. The company said first-half profit may have jumped by between 50 and 100 percent as China's economic growth boosted demand for trucks and construction machinery.

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