Sept. 7 (Bloomberg) -- China’s stocks rose for a fifth day, led by financial and health-care companies, after the government raised the amount foreign funds can invest in equities and boosted orders for swine-flu vaccines.

China Everbright Securities Co. added 1.8 percent and China Citic Bank Corp., the banking unit of the nation’s largest investment company, gained 4.2 percent. Hualan Biological Engineering Inc. jumped the daily 10 percent limit after the Ministry of Industry and Information Technology ordered shots that immunize against the H1N1 virus.

The Shanghai Composite Index rose 19.51, or 0.7 percent, to 2,881.12 at the close, capping a five-day, 8 percent gain. It’s still down 17 percent from its Aug. 4 peak on concern banks will be forced to rein in lending, derailing an economic recovery. The CSI 300 Index, measuring Shanghai and Shenzhen exchanges, gained 0.9 percent to 3,104.21.

“Investors see the move as the start of government steps to boost the market,” said Xu Lirong, a Shanghai-based fund manager at Franklin Templeton Sealand Fund Management Co., which oversees about $2.56 billion. Further support measures may include delaying approval for new share sales, Xu said.

The benchmark index rose the most in six months on Sept. 3 after the securities regulator said it will promote a “stable and healthy” market, triggering speculation the government would refrain from measures to curb lending. The banking regulator later said it may take years to implement stricter capital requirements for banks.

China shouldn’t let market volatility deter it from “fine- tuning” economic policy because delays may mean more drastic adjustments later, central bank adviser Fan Gang said.

Quota Limit

China Everbright, the brokerage that listed last month, gained 1.8 percent to 23.62 yuan. China Life Insurance Co., the largest life insurer, added 1.7 percent to 27.96 yuan.

The limit on individual quotas will rise from $800 million to $1 billion and the lockup period for some investors will be cut to three months from one year, the State Administration of Foreign Exchange said Sept. 4. Combined investments under the so-called qualified foreign institutional investor program will remain capped at $30 billion.

As of August, 87 qualified foreign institutional investors including UBS AG and Morgan Stanley were permitted to invest a combined $15 billion in local-currency stocks and bonds.

“The move will temporarily ease concern about liquidity and the regulators will probably accelerate approvals of new quotas for foreign investors,” said Zhang Qi, an analyst at Haitong Securities Co. in Shanghai.

Banks Gain

Citic Bank climbed 4.2 percent to 5.50 yuan. Bank of Beijing Co., part-owned by ING Groep NV, gained 4.3 percent to 17.13 yuan. The stock lost 25 percent last month.

Liu Mingkang, the head of the China Banking Regulatory Commission, said at the weekend lending growth will be “more stable” in the second half of this year after a reduction in the ratio of non-performing debt in the first six months.

The surge in new loans to more than $1 trillion in the first half spurred concern the credit expansion was fueling asset bubbles. The Shanghai gauge jumped 63 percent in the first six months, the world’s second-best performing stock market.

The China Banking Regulatory Commission will take “effective” steps to prevent bank loans from being diverted to stocks and property, the China Securities Journal reported today, citing Wang Huaqing, the regulator’s discipline chief.

Swine Flu

Hualan Biological surged 10 percent to 45.03 yuan, its highest close since the stock listed in June 2004. Beijing Tiantan Biological Products Corp. jumped 10 percent to 26.28 yuan, extending a two-day, 13 percent advance. Shenzhen Neptunus Bioengineering Co. gained 10 percent to 10.69 yuan.

China last week approved swine flu vaccines produced by Hualan Biological and Sinovac Biotech Ltd. and may approve the products of eight other company by mid-September, the State Food and Drug Administration said. Swine flu infections in China may more than double to 10,000 cases, the China Daily newspaper reported today, citing Zeng Guang, a senior epidemiologist at the Chinese Center for Disease Control and Prevention.

“The shares are rising on expectations the government will accelerate the approvals for vaccine production and increase orders, which will help the companies’ earnings,” said Lou Shengrui, an analyst at Shenyin Wanguo Research and Consulting Co. in Shanghai.

Double Coin Holdings Ltd., a manufacturer of rubber tires, jumped the daily 10 percent limit to 15.86 yuan after saying it plans to sell its 28.5 percent stake in a venture with Michelin & Cie.

Investors should buy on any declines in Chinese stocks after a momentum indicator for the Shanghai Composite signaled a possible rebound, DMG & Partners Securities Pte said.

The Moving Average Convergence/Divergence, or MACD, line, based on the equity benchmark’s average level during the past 12 and 26 months, last week climbed near its so-called signal line, based on a nine-day average. The signal to buy last occurred more than a month ago, according to data tracked by Bloomberg.

--Zhang Shidong. 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: September 7, 2009 03:46 EDT