Dec. 5 (Bloomberg) -- China's stocks rose for a third day, lifting a key benchmark to a two-week high. Baoshan Iron & Steel Co. paced gains among steelmakers on expectations higher steel prices will boost their earnings.

``Steel prices have performed strongly,'' Lu Yizhen, who helps manage $640 million at Citic-Prudential Fund Management Co., said in Shanghai. ``Optimism toward steelmakers is returning.''

The CSI 300 Index, which tracks yuan-denominated A shares listed on China's two exchanges, gained 136.73, or 2.8 percent, to 4,965.95 at the close, the highest since Nov. 21 and completing a three-day, 4.8 percent rally.

Baoshan Steel, the country's biggest steelmaker, rose 1.03 yuan, or 6.6 percent, to 16.56. Separately, parent Baosteel Group Corp. bought a 1.44 percent stake in Xinhua Metal Products Co. for 200 million yuan ($27 million) in a private equity offer. Xinhua Metal, a manufacturer of steel products based in the southern province of Jiangxi, advanced 0.65 yuan, or 4.4 percent, to 15.57.

Steel prices gained 5.5 percent to 4,819 yuan a metric ton in the past week, according to Beijing Antaike Information Development Co.

Angang Steel Co., China's third-largest steelmaker by output, jumped 2.42 yuan, or 9.2 percent, to 28.80. Tangshan Iron & Steel Co., the listed unit of China's second-biggest steelmaker by output, climbed 1.40 yuan, or 7.5 percent, to 20.05.

Still, the CSI 300, which has more than doubled in 2007, is down 16 percent from an Oct. 16 record, as the government has raised interest rates this year and ordered banks to set aside more money as reserves to curb the growth in asset prices.

Huge Liquidity

``It's too early to talk about a bear market as there's still a huge amount of liquidity in the market,'' said Ivan Tham, who helps manage $5 billion at City of London Investment Co. in Singapore, including investments in A-share unit trusts.

PetroChina Co., the nation's biggest oil company, gained 0.85 yuan, or 2.8 percent, to 31.44, having its first back-to- back gain since its Shanghai debut on Nov. 5. The stock rose 0.5 percent yesterday. PetroChina has dropped 35 percent from a record high set on the first day of domestic trading.

China's oil demand will rise 4.5 percent annually till 2015, said a research unit of China National Petroleum Corp., parent of PetroChina, in a report today.

The Shanghai Composite Index, which tracks the bigger of China's stock exchanges, rose 2.6 percent to 5,042.65. The Shenzhen Composite Index added 2.8 percent to 1,296.72.

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, climbed 0.20 yuan, or 1.9 percent, to 10.51. The lender plans to raise 4 billion yuan selling residential mortgage-based securities, the second such sale in the country.

China United Telecommunications Corp. (600050 CH), which controls the nation's second-largest cell phone operator, rose 0.13 yuan, or 1.3 percent, to 10.07. Its Hong Kong-listed unit, China Unicom Ltd. (762 HK), will expand its network to cover the entire country by early next year, Executive Vice President Li Zhengmao said. Separately, a stockholder is seeking as much as HK$2.43 billion ($312 million) selling shares in its Hong Kong- listed unit China Unicom, according to an e-mail sent to investors.

Haitong Securities Co. (600837 CH), the country's second- largest listed brokerage, advanced 1.73 yuan, or 3.3 percent, to 54.73. The brokerage said it got the industry regulator's approval to open 12 outlets.

Yanzhou Coal Mining Co. (600188 CH), the listed unit of China's fourth-biggest coal miner, gained 0.75 yuan, or 3.8 percent, to 20.40. Yanzhou Coal acquired mining rights from its parent to expand its operations.

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

Last Updated: December 5, 2007 03:09 EST