Nov. 6 (Bloomberg) -- China’s stocks rose, sending the Shanghai Composite Index to its biggest weekly gain in more than three months, on speculation the government will extend stimulus measures to cement the economic recovery.

FAW Car Co., which makes passenger cars in China with Volkswagen AG, and Jiangling Motors Corp. climbed more than 3 percent after the China Securities Journal said the government may continue tax cuts on automobile sales. Daqin Railway Co. jumped 4.5 percent after Orient Securities Co. raised its rating on the shares. China Vanke Co. the nation’s biggest listed property developer, gained 2.8 percent on increased sales.

The benchmark index rose 8.98, or 0.3 percent, to 3,164.04 at the close, gaining for a sixth day. The gauge has surged 5.6 percent this week, the most since the period to July 24, as manufacturing expanded at the fastest pace in 18 months and companies from SAIC Motor Corp. to Industrial Bank Co. posted higher profit. The CSI 300 Index added 0.5 percent to 3,483.02.

“Fourth-quarter and 2010 earnings are likely to exceed expectations if the third-quarter performance is anything to go by,” said Lu Yizhen, chief investment officer at Tianhong Asset Management Co. in Beijing, which oversees the equivalent of $665 million. “There’s no reason to sell stocks now.”

The Shanghai measure has climbed 14 percent this quarter, the best performer among 89 global indexes tracked by Bloomberg, on signs the government’s stimulus package and record lending will sustain the nation’s economic recovery. Gross domestic product expanded 8.9 percent in the three months to Sept. 30, the quickest in a year.

Government Target

China should avoid pursuing “excessive growth” so that the nation can keep inflation under control as the economy recovers, Yao Jingyuan, the statistics bureau’s chief economist, said yesterday. The economy is assured of expanding 8 percent this year, meeting the government’s target, according to Yao.

FAW Car gained 3.7 percent to 21.44 yuan, extending this quarter’s rally to 26 percent. Jiangling Motors, the commercial vehicle partner with Ford Motor Co., surged 4.8 percent to 24.10 yuan. Tianjin FAW Xiali Automobile Co. added 2.3 percent to 8.88 yuan.

The government may also expand measures that encourage automobile and home appliance sales in the nation’s countryside, the China Securities Journal reported today, citing Ministry of Industry and Information Technology spokesman Zhu Hongren. China will next draft policies aimed at increasing incomes, it said.

The country’s cabinet pledged Oct. 21 to continue monetary and fiscal stimulus even after economic growth exceeded officials’ expectations for the first nine months of the year.

Rating Changes

Daqin Railway, the operator of China’s biggest coal transport network, advanced 4.5 percent to 11.35 yuan. The stock was raised to “buy” from “add” by analyst Jie Xu at Orient Securities. The stock has lagged behind the Shanghai Composite’s 74 percent rally this year.

Vanke gained 2.8 percent to 12.10 yuan. The developer said October sales rose 95 percent from a year earlier. Ten-month sales increased 35 percent, it said.

The governments of Hunan and Jilin provinces plan to extend incentives for home purchases to next year, the 21 Century Business Herald said, without saying where it got the information.

Poly Real Estate Group Co., China’s second-largest developer by market value, rose 1.4 percent to 26.50 yuan. Gemdale Corp., the No. 4, added 1.5 percent to 16.20 yuan.

China’s policy makers must avert stock and property market bubbles after lending swelled to a record $1.27 trillion this year, the World Bank said this week.

Stimulus Concern

Concern that China will restrain stimulus measures too early dragged on the nation’s stocks last quarter, when a decline in new loans in July sent the benchmark index tumbling 22 percent in August. The gauge is still down 8.9 percent from this year’s peak on Aug. 4.

Third-quarter net income for China’s listed companies fell 1.9 percent from a year earlier, narrowing from a 13.7 percent decline for the first six months, Citic Securities Co. said in a report Nov. 2. Profit may rise 25 percent for this year and 23 percent in 2010, it said.

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

Hainan-based companies: Hainan Zhenghe Industrial Group Co. (600759 CH) surged by the 10 percent daily cap to 6.88 yuan. Hainan Haide Industry Co. (000567 CH) climbed 10 percent to 9.41 yuan.

The country’s cabinet may soon approve a plan to promote the south China province of Hainan as an international tourism destination, the China Securities Journal reported today.

Hebei Taihang Cement Co. (600553 CH) jumped the 10 percent daily trading limit to 11.19 yuan. Zhongrun Economic Development Co. bought a 5 percent stake in the company on the Shanghai Stock Exchange from Oct. 29 to Nov. 5, it said in an exchange filing.

Jiangsu Yanghe Brewery Joint-Stock Co. (002304 CH) rose 47 percent to 87.91 yuan on its first day of trading in Shenzhen. The company raised 2.7 billion yuan in its initial public offering, selling 45 million shares at 60 yuan each.

Wuhan Langold Real Estate Co. (002305 CH) jumped 72 percent to 21.16 yuan in its Shenzhen debut after raising 590.4 million yuan in an initial sale of 48 million shares.

--Zhang Shidong. Editors: Mark McCord, 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 6, 2009 03:19 EST