July 1 (Bloomberg) -- China’s stocks rose, driving the benchmark index above 3,000 points for the first time in a year, as an expansion in the nation’s manufacturing for a fourth month indicated the world’s third-largest economy is recovering.

Angang Steel Co., the country’s second-biggest steelmaker by market value, jumped 8 percent and Bank of China Ltd., the third-biggest lender, added 3.1 percent. Poly Real Estate Group Co. rose 3.8 percent after Caijing Magazine reported land was sold in Beijing at the highest price this year.

“Expectations the economy will recover will push stock prices higher,” said Wang Peng, Shanghai-based chief investment officer at First Trust Fund Management Co., which oversees about $2.1 billion. “We expect listed companies to post earnings gains in the third or fourth quarter.”

The Shanghai Composite Index rose 48.79, or 1.7 percent, to 3,008.15, its highest close since June 11, 2008. The index gained 63 percent in the first half of 2009, the world’s second- best performer. Shares on the gauge trade at 25.6 times earnings, the most expensive since March 2008, weekly data compiled by Bloomberg show.

The CSI 300 Index, measuring exchanges in Shanghai and Shenzhen, added 2.3 percent to 3,237.90.

The Shanghai index has rebounded in 2009 as investors bet a 4 trillion yuan stimulus plan and record lending will revive an economy that grew the least since 1999 in the first quarter. The gauge plunged 65 percent last year as the global recession curbed demand for the country’s exports. The index still trades at less than half its peak of 6,092.06 on October 2007.

Manufacturing Survey

The official Purchasing Managers’ Index increased to a seasonally adjusted 53.2 in June from 53.1 in May, a government report showed today, above the 50 level that indicates an expansion. Export orders expanded for a second month, according to the reports. Another PMI, released today by CLSA Asia-Pacific Markets, also showed an expansion.

Angang Steel advanced 8 percent to 14.25 yuan, the most since June 1. Baoshan Iron & Steel Co., China’s biggest steelmaker, climbed 4.4 percent to 7.35 yuan. Guangxi Liugong Machinery Co., a Chinese maker of construction equipment, added 3.1 percent to 17.16 yuan. Bank of China gained 3.1 percent to 4.63 yuan.

China’s recovery will be stronger by the beginning of next year as trade and investment in housing improve, central bank adviser Fan Gang said at a forum in Beijing today. Export growth will return to “normal levels” by the end of this year or the start of 2010, he said.

Poly Real Estate, China’s second-largest developer by market value, added 3.8 percent to 28.96 yuan. China Vanke Co., the No. 1, climbed 3.5 percent to 13.19 yuan.

Land Sale

A Sinochem Corp. unit bought land at auction for 4.06 billion yean ($594 million), Caijing Magazine reported today, without saying where it got the information. The Beijing-based magazine cited Soho Chairman Pan Shiyi as saying the price of the land was “very high.”

A measure of 24 property stocks on the Shanghai Composite jumped 5.3 percent to its highest close since March 2008. It was best performer among the five industry groups today.

“The land sale is a clear signal of how strong the property market is now,” said Li Jun, a strategist at Central China Securities Holdings Co. in Shanghai. “It also indicates that developers are probably operating well. Only when they are flush with cash and see falling housing inventories, will developers start to buy land.”

The economy may keep improving in the third and fourth quarters, enabling the nation to meet its 8 percent economic growth target for this year, central bank Governor Zhou Xiaochuan said this week.

“The domestic economy is definitely recovering but this has been mostly priced in and it wouldn’t be surprising if the market stages a correction at some point,” said Chen Wenzhao, a strategist at China Merchants Securities Co. in Shanghai.

Livzon Pharmaceutical Group Inc. rose 7.6 percent to 28.60 yuan after the company, known in Chinese as Lizhu Pharmaceutical, said one of its drugs was found in tests to inhibit swine flu.

--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: July 1, 2009 04:16 EDT