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China: Stocks gain for second week as typhoon shuts Hong Kong

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[HONG KONG] Chinese stocks posted a second weekly advance as signs of a stabilising economy outweighed concern about a weakening currency.

Hong Kong's markets were closed due to a typhoon.

The Shanghai Composite Index climbed 0.2 per cent on Friday, taking its gain this week to 0.9 per cent. China Railway Group Ltd and China State Construction Engineering Corp led gains among infrastructure-related firms amid speculation the government will boost spending on bridges to railways.

The yuan reached a six-year low after the central bank weakened its daily reference rate by the most since August, while China's 10-year government bond yield fell to a record low.

Data released this week painted a brighter picture of the economy, with credit growth last month quickening and third-quarter economic growth and September retail sales meeting expectations.

At the same time, the currency's drop this month has fuelled fears capital outflows will quicken, tightening funding conditions and limiting gains in equities.

"Generally the market isn't lively," said Wei Wei, an analyst at Huaxi Securities Co in Shanghai.

"Toward year-end, many funds are closing their books, so there's less money in the market."

Storm Signal

Trading in Hong Kong was shut for the day as Typhoon Haima lashed the city. The Hang Seng Index climbed 0.6 per cent in the four days through Thursday.

The Shanghai Composite rose to 3,090.94. The gauge advanced to a six-week high earlier in the week, lifted by a 1.4 per cent rally on Tuesday. The index is still down 13 per cent for the year as last summer's US$5 trillion rout deterred investors and surging home prices lured funds to property.

Data released Friday showed tentative signs of cooling in the housing market as authorities step up home-buying curbs. New-home prices, excluding government-subsidised housing, gained last month in 63 of the 70 cities the government tracks, down from 64 in August, the National Bureau of Statistics said Friday. Prices dropped in six cities, compared with four a month earlier.

China Railway climbed 3 per cent, taking its weekly gain to 15 per cent, while China State Construction surged 5.7 per cent. Sany Heavy Industry Co, which makes heavy machinery, rose to a six-month high.

Spending Boost

Infrastructure-related shares are rising because investors are betting the government will boost spending as there's no clear sign of a turnaround in the economy and there's limited room for further monetary easing, said Zhang Gang, a strategist at Central China Securities Co in Shanghai.

China should improve the efficiency of resource allocation in the capital market to better serve the real economy, according to a front-page commentary on Financial News, a publication of the central bank. Regulators should focus on protecting investor rights and curbing excess speculation, the unsigned article said.

In a sign of lingering doubts over the economy's strength, the 10-year government bond yield fell to 2.64 per cent, a new record low in ChinaBond data going back to 2006.

Beijing E-Hualu Information Technology Co and Tianjin Chase Sun Pharmaceutical Co fell more than 2.8 per cent to lead declines on the ChiNext gauge of small-cap companies. Beijing Capital Development Co dropped 2 per cent after reporting third-quarter net income that more than halved from a year ago.