China's Stocks Advance; Pudong Bank, Air China Gain on Yuan

China's stock benchmark rose on the first trading day of 2008. Shanghai Pudong Development Bank Co. and Air China Ltd. gained on expectation a stronger local currency will boost demand for yuan-priced assets and cut foreign debts.

"An appreciating yuan has provided an excuse for buying into banks and airlines, which are the direct beneficiaries of the strengthening local currency,'' said Zhang Ling, who manages the equivalent of $1.1 billion with ICBC Credit Suisse Aasset Management Co. in Beijing.

The CSI 300 Index, which tracks yuan-denominated A shares listed on China's two exchanges, rose 27.12, or 0.5 percent, to 5,365.39 as of 10:54 a.m. local time. It earlier fell as much as 1 percent.

Pudong Bank, the Chinese partner of Citigroup Inc., gained 1.85 yuan, or 3.5 percent, to 54.65. China Minsheng Banking Corp., the nation's only privately controlled lender, rose 0.15 yuan, or 1 percent, to 14.97.

Air China, the world's biggest airline by market value, advanced 1.41 yuan, or 5.3 percent, to 28.89. China Southern Airlines Co., the nation's biggest carrier by fleet size, rose 0.87 yuan, or 3.1 percent, to 28.81.

The yuan rose as much as 0.12 percent to 7.2950 per dollar in Shanghai today, the strongest since the end of a peg to the dollar, according to the China Foreign Exchange Trade System.

A stronger yuan lowers the repatriated value of airlines' debts denominated in foreign currencies.

'Tight' Monetary Policy

Citic Securities Co. led a decline among some of the biggest companies on concern the government will take measures to cool economic growth and curb liquidity.

China's central bank reiterated its pledge to maintain a "tight" monetary policy in 2008, continuing to use "balanced" measures to manage the economy, said Zhou Xiaochuan, the governor of the People's Bank of China, in a New Year message on the bank's Web site on Dec. 29. The bank will further control liquidity, Zhou added.

Citic Securities, China's biggest publicly traded brokerage, retreated 2.77 yuan, or 3.1 percent, to 86.50. China Petroleum & Chemical Corp., Asia's biggest oil refiner, also known as Sinopec, lost 0.23 yuan, or 1 percent, to 23.20. Baoshan Iron & Steel Co., China's biggest steelmaker, dropped 0.28 yuan, or 1.6 percent, to 17.16.

China raised interest rates six times and the reserve ratio 10 times last year to ease inflation, which accelerated at the quickest pace since 1996.

The Shanghai Composite Index, which tracks the bigger of China's stock exchanges, was little changed at 5,257.88. The Shenzhen Composite Index added 0.8 percent to 1,458.02.