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Stocks climb from one-month low; Airlines gain, CSR drops

Updated: 2011-07-27 09:16

By Irene Shen (China Daily)

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SHANGHAI - Stocks advanced on the Chinese mainland, lifting the benchmark index from a one-month low, as airlines climbed on speculation that competition from the high-speed rail industry will fall after a train crash on Saturday.

China Eastern Airlines Corp jumped 10 percent after ticket prices between Beijing and Shanghai climbed. Rising Nonferrous Metals Share Co led a rally for rare-earth producers as the company estimated first-half profit might have jumped eightfold. CSR Corp, the country's biggest train maker by market value, sank 3.8 percent after a press officer said the company made one of the trains involved in the accident.

The Shanghai Composite Index added 0.5 percent to 2703.03 at the 3 pm local time close. The CSI 300 Index rose 0.3 percent to 2977.77, following Monday's 3.3 percent slide.

American depositary receipts of Chinese companies fell after the Shanghai Composite sank the most since Jan 17 and as US stocks retreated on speculation officials will fail to raise the debt limit and avoid default.

The Bank of New York Mellon China ADR Index, which tracks American depositary receipts, declined 0.6 percent in New York on Monday, snapping gains in the previous four sessions.

The Shanghai Composite has slumped 3.7 percent this year as government efforts to curb inflation slow economic growth.

The gauge reached this year's intra-day low of 2610.99 on June 20. Its companies trade at 12.4 times estimated profit, the lowest level in a month, data compiled by Bloomberg show.

A gauge tracking financial companies in the CSI 300 accounted for 25 percent of the main index's advance.

The financials gauge trades at 9.2 estimated profit, the lowest valuation in a month, according to Bloomberg data. Shenzhen Development Bank Co gained 2.1 percent to 17.23 yuan ($2.67).

"Authorities may choose intentionally to slow GDP growth gradually but firmly to 7 to 8 percent in following years and spend more time fixing the problems created by artificial fast growth," Minggao Shen, an analyst at Citigroup, wrote in the report on Monday.

The accident will slow the pace of investment "at least in the near term" in subways, bridges and roads as well as in high-speed rails, which will affect demand for commodities, according to the note. Airlines will benefit in the near-term from reduced competition, Shen wrote.

China Eastern, the nation's second-biggest carrier, surged 10 percent to 5.60 yuan, its biggest gain since March 2009. The company's Hong Kong-listed shares were raised to "outperform" from "inline" at Standard Chartered PLC. China Southern Airlines Co, the nation's largest carrier, jumped 9.2 percent to 8.68 yuan.

"The train accident has raised concern that the government will tighten approvals of investment projects going forward," said You Bainian, a Shanghai-based fund manager at Fortune SGAM Fund Management Co, a venture with the asset management unit of Societe Generale that manages $6.2 billion.

CSR slid 3.6 percent to 5.82 yuan, the lowest close since Oct 12. China CNR Corp, the nation's second-biggest train maker, slipped 4.1 percent to 5.63 yuan.

China Railway Construction Corp, the builder of more than half the nation's rail links since 1949, lost 0.9 percent to 5.36 yuan.

Bloomberg News

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