Nov. 2 (Bloomberg) -- China’s stocks rose the most in three weeks after the nation’s manufacturing expanded at the fastest pace in 18 months and SAIC Motor Corp., Suning Appliance Co. and Industrial Bank Co. reported higher profit.

SAIC Motor, the country’s largest carmaker, advanced 6.3 percent, Suning Appliance added 3.2 percent and Industrial Bank climbed 7.5 percent. Hualan Biological Engineering Inc. jumped the 10 percent daily limit on speculation the spread of swine flu will boost product sales. Stocks on the ChiNext startup board in Shenzhen plunged after surging on their Oct. 30 debut.

“The manufacturing data and solid earnings growth in some sectors have dispelled the concern the economic recovery will falter,” said Yan Ji, who helps oversee about $1.2 billion at HSBC Jintrust Fund Management Co. in Shanghai. “Risky assets such as equities are still good bets.”

The Shanghai Composite Index climbed 80.80, or 2.7 percent, to 3,076.65 at the close, the most since Oct. 9 and erasing an earlier 2.4 percent drop. The gauge has rallied 69 percent this year as Premier Wen Jiabao’s stimulus package and record lending drove China’s economic rebound. The measure plunged 65 percent last year as exports slumped because of the global financial crisis. The CSI 300 Index advanced 3.4 percent to 3,392.80.

China’s manufacturing expanded at the fastest pace in 18 months, according to a purchasing managers’ index released by HSBC Holdings Plc today and also a government-backed PMI released yesterday. The HSBC index rose to a seasonally adjusted 55.4 from 55 in September, an e-mailed statement showed.

Automakers Gain

SAIC Motor added 6.3 percent to 24.68 yuan. Third-quarter profit jumped more than ninefold as economic growth and government stimulus spurred demand for vehicles made with General Motors Co. and Volkswagen AG.

Chongqing Changan Automobile Co., the Chinese partner of Ford Motor Co. and Mazda Motor Corp., gained 7.4 percent to 14.02 yuan. The company said it posted third-quarter net income of 308.7 million yuan, compared with a net loss of 106.6 million yuan a year earlier.

Suning Appliance, China’s biggest home appliance retailer by market value, advanced 3.2 percent to 16.69 yuan. The company said 2009 net income may rise 25 percent to 40 percent from a year earlier. Third-quarter profit increased 15 percent to 704.8 million yuan, it said.

Industrial Bank, part-owned by a unit of HSBC Holdings Plc, gained 7.5 percent to 40.09 yuan after saying third-quarter profit advanced 16 percent to 3.35 billion yuan.

Earnings Expectations

Third-quarter net income for China’s listed companies fell 1.9 percent from a year earlier, meeting expectations and narrowing from a 13.7 percent decline for the first six months, Citic Securities Co. said in a report today. Profit may rise 25 percent for annual 2009 and 23 percent in 2010, it said.

The world’s third-biggest economy may grow 9.5 percent from a year earlier this quarter, Zhang Liqun, of the State Council Development and Research Center, said yesterday. That would be the third straight acceleration and the biggest gain since the second quarter of 2008.

Commerce Minister Chen Deming warned Oct. 31 that the global economy may “plunge” if nations withdraw support measures too quickly.

The Shanghai index slid 3.6 percent last week, the most since the five days to Sept. 25, as the banking regulator said it plans to tighten rules on personal credit.

China may increase the key one-year lending rate to 6.39 percent from 5.31 percent by the end of next year, said Brian Jackson, Hong Kong-based strategist for emerging markets at Royal Bank of Canada. UBS AG said the government may tighten by imposing a lending target of about 7 trillion yuan ($1 trillion) for 2010.

Startup Board

Among ChiNext stocks, Huayi Brothers media Corp., backed by Alibaba Group Holding Ltd. Chairman Jack Ma and director Feng Xiaogang, tumbled the 10 percent limit to 63.73 yuan after rallying 148 percent. Beijing Toread Outdoor Products Co., a retailer of camping and outdoor equipment, plunged 10 percent to 45.06 yuan after jumping 153 percent.

The ChiNext market, which has fewer listing requirements than China’s two main boards, was created as an alternative for smaller Chinese companies seeking to raise funds.

“I don’t think it’s safe for investors to buy any of those start-up companies for at least six months,” said Yan at HSBC Jintrust Fund Management. “Valuations are too high.”

Drugmakers gained. Hualan Biological, which said last month it won a government order for its swine flu vaccine, climbed 10 percent to 68.19 yuan, its highest close since listing in 2004. Beijing Tiantan Biological Products Corp., which also won a government vaccine order, surged 10 percent to 33.87 yuan.

Swine flu is “spreading rapidly” across China, where nearly 80 percent of total flu infections are the A/H1N1 virus, the China Daily said today, citing the health ministry.

An index tracking health-care stocks on the CSI 300 index rallied 4.6 percent, the most among the 10 industry groups.

The following companies were among the most active in China’s markets. Stock symbols are in brackets after companies’ names.

Shanghai Developers: Shanghai Lujiazui Finance & Trade Zone Development Co. (600663 CH), a developer in Shanghai’s financial district, advanced 8.9 percent to 30.47 yuan. Shanghai Jielong Industry Corp. (600836 CH) jumped 10 percent to 18.57 yuan.

A planned Walt Disney Co. theme park project in the city has been approved by China’s top economic planning body, the South China Morning Post reported today, citing an unidentified official with direct knowledge of the matter. An official at the Beijing-based NDRC who wouldn’t give her name declined to comment today.

China Pacific Insurance (Group) Co. (601601 CH), the nation’s third-largest insurer, added 5.4 percent to 25.80 yuan. The company posted net income of 1.7 billion yuan, compared with a net loss of 1.64 billion yuan a year earlier, it said.

Inner Mongolia Yili Industrial Group Co. (600887 CH), China’s biggest dairy producer by sales, advanced 5 percent to 24.32 yuan, the highest since January 2008. Goldman Sachs Group Inc. raised its share-price estimate 19 percent on higher profit forecasts.

Shenergy Co. (600642 CH), the power supplier, fell 1.7 percent to 11.91 yuan after saying it plans to sell as many as 350 million additional shares to raise a maximum 2.5 billion yuan.

--Zhang Shidong. With assistance from Chua Kong Ho in Shanghai. Editors: Richard Frost, Linus Chua

To contact Bloomberg News staff for this story: Zhang Shidong in Shanghai at +86-21-6104-7014 or szhang5@bloomberg.net

Last Updated: November 2, 2009 03:03 EST