July 7 (Bloomberg) -- China's stocks rose the most in almost three weeks, led by banking shares, after China Merchants Bank Co. and China Citic Bank Corp. said first-half earnings probably more than doubled.

Merchants Bank, the country's most profitable bank, had its biggest jump in more than two months. Citic Bank, the banking unit of the nation's largest investment company, gained for a fourth day. Beijing North Star Co., the city government's property arm, jumped on speculation next month's Olympic Games will lure more tourists to the capital city.

``Fundamentals are very strong in China compared to any other Asian nation,'' said Liu Yang, managing director at Atlantis Investment Management Ltd. in Hong Kong, which oversees about $4 billion in assets, in a Bloomberg Television interview. ``Chinese stocks are trading at crisis valuations. Do they deserve to trade at crisis valuations? The answer is no. The market deserves a very good rebound from here.''

The CSI 300 Index, which tracks yuan-denominated A shares listed on China's two exchanges, climbed 140.91, or 5.1 percent, to 2,882.76 at the close. The increase was the most since June 18. All of the measure's 10 industry groups gained today, with just one of its 300 constituents falling.

The CSI 300 has dropped 46 percent so far this year, the second-worst performing major stock index tracked by Bloomberg, on concern rising fuel prices and inflation running at a decade- high will slow corporate earnings growth.

Airlines

Air China Ltd. jumped by the daily limit, leading gains among carriers on optimism they will be able to add more flights to Taiwan. Chinese airlines commenced direct services for tourists at the weekend for the first time since hostilities between the two sides ended in 1949.

China Vanke Co., the nation's biggest listed property developer, rose after the Economic Observer reported the government is likely to take measures to ease funding difficulties caused by loan curbs and falling sales.

Merchants Bank jumped 6.5 percent to 22.67 yuan, the biggest gain since April 24. Citic Bank rose 7.3 percent to 5.61 yuan, extending a four-day, 9.4 percent advance.

Merchants Bank said first-half profit may have more than doubled as the company extended more loans while Citic Bank expected first-half profit to rise more than 150 percent on higher interest revenue.

Industrial & Commercial Bank of China Ltd., the nation's biggest listed lender, added 3.5 percent to 4.97 yuan. The company last week forecast its first-half profit to rise by more than 50 percent. China Construction Bank Corp., the country's second-largest bank, rose 3.9 percent to 5.93 yuan.

Vanke, North Star

China Vanke climbed 5.8 percent, to 9.38, a third consecutive day of gains. Poly Real Estate Group Co., China's second-largest developer by market value, surged by the 10 percent daily limit to 15.53.

Beijing North Star advanced 8 percent to 8.20 yuan. Beijing Urban Construction Investment & Development Co., a property developer, soared 10 percent to 13.46 yuan. Beijing Capital Co., an operator of facilities and hotels, gained 6.9 percent to 9.62 yuan.

``The Beijing Olympic Games have given a boost, particularly to those Beijing-based companies,'' said Zhang Ling, who manages the equivalent of $1.1 billion at ICBC Credit Suisse Asset Management Co. in Beijing.

The city is expecting 1.5 million visitors, including 500,000 from overseas, 22,000 journalists, and 16,000 athletes and officials for China's first Olympics, according to official estimates.

More Flights?

Air China, the world's biggest airline by market value, surged by the 10 percent daily limit to 9.52 yuan. China Southern Airlines Co., the nation's biggest carrier by fleet size, jumped 10 percent to 7.92 yuan. China Eastern Airlines Corp., the nation's third-largest carrier by fleet size, jumped 0.67 yuan, or 10 percent, to 7.37.

The carriers are able to operate 18 return flights a weeks to Taiwan under the current agreement. China and Taiwan are slated to hold talks after the Olympics in August to discuss increasing the frequencies, Tony Su, chairman of the Taipei Airlines Association, said on July 4.

The Shanghai Composite Index, which tracks the bigger of China's stock exchanges, rose 4.6 percent to 2,792.40. The Shenzhen Composite Index added 4.9 percent to 846.95.

The following stocks also rose or fell. The stock symbols are in brackets after companies' names.

China Petroleum & Chemical Corp. (600028 CH), Asia's biggest oil refiner, also known as Sinopec, rose 0.49 yuan, or 5.2 percent, to 9.91, the biggest advance since June 18. Sinopec received 2.51 billion yuan ($366 million) in rebates on value- added taxes levied on gasoline and diesel imports in the second quarter, the Xinhua News Agency said on July 4, citing the finance ministry.

China Railway Group Ltd. (601390 CH), Asia's largest construction company, added 0.29 yuan, or 5.5 percent, to 5.55, the steepest gain since April 24. The company said two of its subsidiaries won orders worth 951.6 million yuan.

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

Last Updated: July 7, 2008 04:59 EDT