Most China stocks rose as coal producers and consumer companies gained on an improving earnings outlook. Banks and brokers slid on concern faster inflation may push the central bank to increase interest rates further.

Datong Coal Industry Co. paced advances among coal producers on speculation cold weather will spur fuel demand. GD Midea Holding Co. gained 5.2 percent as rival Gree Electric Appliances Inc.’s higher profit bolstered its outlook. Industrial & Commercial Bank of China Ltd. led a gauge of financial stocks lower after yesterday’s data showed the fastest inflation in 23 months. Citic Securities Co. dropped for the biggest two-day loss in four months on concern this month’s gains were excessive.

“We are still getting more positive on the equity market on valuation,” Timothy Chan, deputy chief investment officer of Ping An Insurance (Group) Co., said in an interview. “This year we had a big correction and valuations have come off to a more reasonable level and earnings growth remains pretty stable.”

The Shanghai Composite Index, which tracks the bigger of China’s stock exchanges, added 0.41, or less than 0.1 percent, to 2,983.94 as of 1:39 p.m. It has risen 0.5 percent this week. The CSI 300 Index gained 0.5 percent to 3,392.48.

The Shanghai gauge has jumped 12 percent this month and 26 percent from its 2010 low on July 5 after lagging behind rallies in other emerging markets and as a rising yuan lured capital inflows. Still, it’s down 8.9 percent this year after the government tightened measures for property speculations and cut the annual new lending quota by 22 percent.

Ping An, the nation’s second-biggest insurer, is diversifying into property and private equity and increasing its holdings in stocks to boost investment performance after its worst year since 2005, Chan said in an interview yesterday.

Coal Stocks

He favors insurers and banks, based on valuations, and said machinery makers for industries related to environmental protection will benefit as China reforms its economy to reduce its reliance on fixed-asset investment and export-driven growth.

Datong Coal, China’s third-largest coal company by capacity, jumped 5 percent to 26.10 yuan. China Coal Energy Co., the second largest, gained 2.1 percent to 12.89 yuan. Pingdingshan Tianan Coal Mining Co., the listed unit of China’s fifth-largest producer of the coal, climbed 2.9 percent to 24.60 yuan.

A cold wave will lower temperatures by as much as 16 degrees centigrade through the weekend in China’s northern and southeastern regions, the National Meteorological Center said yesterday. The spell of cold weather may persist until Oct. 26, according to the center.

Midea, Gree

The Bohai-Rim Steam-Coal Price Index, or BSPI, climbed 1.4 percent to 735 yuan ($110.4) a metric ton as of Oct. 20 from a week earlier, according to the Qinhuangdao Seaborne Coal Market website.

Midea, China’s second-biggest publicly traded appliance maker, advanced 5.2 percent to 18.95 yuan. Qingdao Haier Co., the air-conditioner and refrigerator unit of China’s biggest appliance maker, climbed 6.2 percent to 27.20 yuan. Gree Electric, China’s largest maker of home air-conditioners, yesterday reported a 73 percent increase in third-quarter profit. The stock was suspended today for a shareholders meeting.

Wuliangye Yibin Co., the second-biggest maker of white liquor by market value, added 0.7 percent to 36.03 yuan after saying third-quarter profit rose 63 percent from a year earlier.

China’s consumer prices rose 3.6 percent last month, the statistics bureau said at a briefing yesterday in Beijing. The government has a full-year inflation target of 3 percent. The inflation data spurred concern that more rate increases may be coming after the central bank on Oct. 19 raised borrowing costs for the first time since 2007 to avert asset bubbles.

Rate Outlook

A gauge of financial stocks dropped 0.5 percent today, the third most among the 10 industry groups of the CSI 300. It slid 2.4 percent yesterday to end an 11-day winning streak.

ICBC, the nation’s biggest listed lender, lost 0.4 percent to 4.49 yuan. China Construction Bank Corp., the country’s second-largest bank, slid 0.4 percent to 5.17 yuan.

Eight of 12 economists surveyed by Bloomberg said the benchmark one-year lending rate, used to set a minimum cost for loans in the world’s fastest-growing major economy, will jump at least half a percentage point by the end of 2011. Nomura International Ltd. had the most aggressive estimate, predicting a one percentage point increase for next year.

“The risk is inflation will remain an issue and that’s why next year we have four more rate hikes” as our forecast, Robert Subbaraman, chief economist for Asia excluding Japan at Nomura, said in an interview yesterday in Hong Kong. “Administrative measures are starting to lose their effectiveness.”

Citic Securities, China’s biggest listed brokerage, fell 1.9 percent to 15.18 yuan after sliding 3.2 percent yesterday. The stock headed for its biggest two-day decline since June 30 after soaring 43 percent this month on speculation rising stock- market transactions volumes will boost earnings.