China's Stock Advance; Baosteel, China Southern, Airlines Gain

China's stocks rose. Baoshan Iron & Steel Co. (600019) paced gains among steelmakers after prices of the metal rose and domestic output increased.

``Steel supply is starting to catch up to demand. This will keep steel stocks going strong,'' said Zhang Ling, who manages the equivalent of $1.1 billion with ICBC Credit Suisse Asset Management Co. in Beijing.

Air China (601111) Ltd. and China Southern Airlines Co. jumped by the 10 percent daily limit on speculation the stronger yuan will boost earnings.

Limiting gains, Poly Real Estate Group Co. (600048) and China Minsheng Banking Corp. fell after the nation's spending on factories, equipment and property accelerated, renewing concern that the central bank will raise interest rates to cool the world's fastest-growing major economy.

The CSI 300 Index (SHSZ300), which tracks yuan-denominated A shares listed on China's two exchanges, rose 47.31, or 0.9 percent, to close at 5,397.28. About three stocks rose for every two that fell. For the week, the benchmark advanced 1.9 percent.

Baoshan Steel, China's biggest steelmaker, advanced 1.19 yuan, or 6.4 percent, to 19.80. Angang Steel Co., the second biggest, gained 0.91 yuan, or 2.6 percent, to 36.30. Maanshan Iron & Steel (600808) Co., the Chinese steelmaker with the largest workforce, climbed 0.41 yuan, or 2.8 percent, to 14.90.

Crude-steel output increased 13.6 percent in August from a year earlier, while steel-product output rose 24 percent in the same period, China's statistics bureau said yesterday.

Chinese steel prices, a regional benchmark, gained 12.2 percent in August from a year ago, the People's Bank of China said yesterday. China is the world's biggest producer and user of the metal.

Carriers Rise

Air China, the world's biggest airline by market value, jumped 2.11 yuan to 23.20. China Southern, the nation's biggest carrier, surged 2.35 yuan to 25.85. Shanghai Airlines Co., a Chinese regional carrier, climbed 1.53 yuan to 16.83. Hainan Airlines Co., a Chinese carrier backed by U.S. billionaire George Soros, added 1.05 yuan to 11.59. All climbed by the daily limit.

``Airlines are benefiting from the yuan's appreciation,'' said Wu Kan, an analyst at Shanghai Securities Consulting Co. in Shanghai. ``We expect earnings to be on the upside.''

The yuan has risen 0.4 percent this week, headed for a fourth weekly gain, on speculation the central bank is allowing appreciation to help cool growth in the economy. A stronger Chinese currency cuts the repatriated value of airline's dollar- denominated debt.

Poly Real Estate, China's second-largest developer by market value, declined 2.68 yuan, or 3.4 percent, to 75.98. Financial Street Holding Co., a property developer in Beijing, lost 0.87 yuan, or 2.4 percent, to 35.95.

`Red-Hot'

Minsheng Banking (600016), the nation's only privately controlled lender, fell 0.16 yuan, or 1 percent, to 15.79. China Merchants Bank Co., the nation's fourth-largest lender by market value, dropped 0.27 yuan, or 0.8 percent, to 34.92.

``Speculation about an imminent rate hike is now red-hot among investors, depressing property and banking shares,'' said ICBC Credit Suisse's Zhang.

Fixed-asset investment in urban areas climbed 26.7 percent in the first eight months of 2007 from a year earlier, the statistics bureau said today. That's more than the 26.6 percent increase for the first seven months and the 26.5 percent forecast by economists in a Bloomberg survey.

The People's Bank of China has raised interest rates four times since March and ordered lenders to set aside bigger reserves for the seventh time this year to slow the nation's booming economy, cool asset prices and restrain accelerating inflation.

The Shanghai Composite Index (SHCOMP), which tracks the bigger of China's stock exchanges, climbed 0.7 percent to 5.312.18. The Shenzhen Composite Index (SZCOMP) gained 1.6 percent to 1,482.86.

To contact the reporter on this story: Zhang Shidong in Shanghai szhang5@bloomberg.net; Josephine Lau in Beijing at jlau22@bloomberg.net

To contact the editor responsible for this story: Andy Gilbert at agilbert8@bloomberg.net

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