SHANGHAI - Stocks on the Chinese mainland rose for a third day on speculation higher borrowing costs will bolster bank profits and concerns eased that the Japanese nuclear crisis may curb regional economic growth.

Industrial and Commercial Bank of China Ltd (ICBC) and Bank of China Ltd led gains for lenders after Barclays Plc said banks will post "strong" earnings. Anhui Conch Cement Co jumped to the highest in three years as CITIC Securities Co predicted a peak season for cement consumption.

"The Japan nuclear crisis has been progressing in a way that the situation will be very likely brought under control," said Wang Zheng, chief investment officer at Jingxi Investment Management Co in Shanghai, which manages about $120 million. "Stocks are still an attractive place to put money amid the backdrop of the global recovery."

The Shanghai Composite Index added 0.34 percent to 2919.14 at the 3 pm close on Tuesday. The gauge trades at 13.7 times estimated earnings, compared with around 16 times at the end of last year. The CSI 300 Index rose 0.49 percent to 3222.96.

Chinese lenders may extend their "outperformance" relative to the market and regional banks as recent increases in reserve requirements won't hurt earnings, Emil Wolter, Asia equities strategist at Royal Bank of Scotland, said in a report.

Banks will report "strong" earnings for 2010, with net profit growing at 35 percent on average, according to Barclays. Net interest margins improved after the central bank raised borrowing costs, May Yan and Allen Zhang, Hong Kong-based analysts at Barclays, said in a report.

ICBC added 0.46 percent to 4.36 yuan (67 cents). Bank of China advanced 0.62 percent to 3.26 yuan. China Construction Bank Corp rose 0.61 percent to 4.92 yuan.

ICBC is due to announce its 2010 earnings next week. Bank of China and China Construction Bank are scheduled to report this week.

Anhui Conch jumped 4.76 percent to 37.88 yuan, its highest close since January 2008. Gansu Qilianshan Cement Group Co advanced 5.51 percent to 22.79 yuan. Huaxin Cement Co climbed 6.13 percent to 45.16 yuan.

China's cement prices rose 0.2 percent last week from a week earlier, analysts led by Zeng Hao at CITIC Securities wrote in a report dated on Monday. The brokerage forecast a peak season for cement consumption in late March and maintained an "overweight" rating on the industry.

The temblor in Japan won't have a "significant" effect on Asian countries that export to Japan because the export loss will be offset by reconstruction demand, Nomura Holdings Inc said.

Anhui Heli Co, a manufacturer of trucks and construction machinery, surged 7.68 percent to 20.32 yuan, its biggest gain since Jan 27. Net income for 2010 jumped 224 percent from a year earlier to 362.1 million yuan as the profit margin increased, Anhui Heli said in a statement on Monday. Dalian Dayang Trands Share Co, an apparel maker, jumped by the 10 percent daily limit to 17.39 yuan.

Bloomberg News

(China Daily 03/23/2011 page16)