China Rail Construction Corp. (601186), climbed the most in five months. LandOcean Energy Services Co., which makes drilling equipment for oil and shale gas, advanced to a five-month high after  Shanghai  Securities News said the nation plans to auction five shale-gas blocks inHunan province. Shanghai Chaori Solar Energy Science & Technology Co. dropped to a one-week low after the European Union threatened to impose tariffs on Chinese solar panels.

“The subway development plan boosts investors’ expectations of more spending by the government,” Xu Shengjun, an analyst at Jianghai Securities Co. in Shanghai, said by phone today. “Still, it’s widely expected economic data to be released soon won’t be great and will drag on stocks.”

The  Shanghai Composite Index (SHCOMP)  gained 0.3 percent to 2,043.09 as of 10:56 a.m. local time after closing yesterday at its lowest level since February 2009. The  CSI 300 Index (SHSZ300)  added 0.4 percent to 2,207.79. The  Hang Seng China Enterprises Index (HSCEI)  of Chinese companies traded in  Hong Kong  advanced less than 0.1 percent. The  Bloomberg China-US Equity Index (CH55BN)  of the most-traded Chinese shares in the U.S. sank 1 percent to 86.29.

Signs that China’s economic slowdown is deepening have dragged the Shanghai Composite down 8.2 percent this  quarter. The gauge trades at 9.3 times estimated profit, near the lowest level since January, according to weekly  data  compiled by Bloomberg.

“Many investors are buying today because the index has fallen quite a bit the past few sessions,” Jianghai’s Xu said.

Subway Plan

China Railway Construction, builder of more than half the nation’s rail links, climbed 4.2 percent to 4.49  yuan, headed for the biggest advance since April 5. CSR Corp., China’s biggest trainmaker by market value, jumped 4.7 percent to 4.05 yuan, on course for the biggest gain since April 15.

Rail stocks led a gauge of industrial companies in the CSI 300 index up by 1.2 percent, the most among 10  industry groups. The National Development and Reform Commission approved development plans of subways in 18 cities including Suzhou, Hangzhou, Guangzhou, Tianjin and Shenzhen, the agency said on its website yesterday.

The government said yesterday industrial output will expand by about 10 percent this year, lowering its sights from an 11 percent goal given in December after weaker-than-anticipated domestic and overseas demand.

Factory Production

A slow recovery abroad and weak investment at home will keep weighing on factories, the Ministry of Industry and  Information Technology  said in a statement on its website yesterday. Economic  growth  dipped to a three-year low of 7.6 percent last quarter.

The People’s Bank of China has held off signaling further easing measures after two interest rate cuts this year.

Goldman Sachs cut its estimate for China’s 2012 GDP growth to 7.6 percent from 7.9 percent and reduced its 2013 forecast to 8 percent from 8.5 percent, economists Li Cui,  Yu Song, MK Tang and Yin Zhang wrote in a note to clients, citing weaker economic data and softer external demand.

“We’re seeing more data showing growth slowing in China but we’re also seeing very few signs that the central bank is interested in aggressive easing,”  Timothy Ghriskey, the chief investment officer at Solaris Group LLC, which manages about $2 billion in assets, said in a phone interview from  Bedford Hills,  New York. “If the central bank stays on the sidelines, we don’t see a short-term catalyst that might send us in a different direction.”

Solar Power

Solar companies fell after the EU opened a probe into whether Chinese manufacturers of solar panels sell them in the 27-nation bloc below cost, a practice known as dumping. The inquiry covers crystalline silicon photovoltaic modules or panels and cells and wafers used in them.

Shanghai Chaori Solar Energy declined 2 percent to 5.50 yuan. Zhejiang Sunflower Light Energy Science & Technology Co. retreated 1.4 percent to 6.37 yuan.

LandOcean gained 3.1 percent to 22.99 yuan, headed for the highest close since April 20.  ChinaOil HBP Science & Technology Co. gained 2.6 percent to 10.95 yuan after the shale-gas auction report.

The Shanghai Composite’s 30-day  volatility  reading was at 12, compared with this year’s average of 17. About 5.7 billion shares changed hands in the gauge yesterday, about 26 percent lower than the daily average this year. The gauge sank 2.7 percent in August, a fourth straight month of declines. That’s the longest streak since the five months through August 2004, according to data compiled by Bloomberg.

The  iShares FTSE China 25 Index Fund, the biggest Chinese exchange-traded fund in the U.S., declined for a second day, losing 0.9 percent to $32.17 yesterday.

To contact the editor responsible for this story: Darren Boey at  dboey@bloomberg.net

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