SHANGHAI - Most stocks on the Chinese mainland rose as growth in the manufacturing industry overshadowed concern the nation's tight monetary policies will restrict economic expansion.

China Shipbuilding Industry Co and Changchun Faway Automobile Co climbed at least 1.7 percent, leading gains among industrial companies, after a purchasing managers index advanced for a third straight month in February.

Jiangsu Hengrui Medicine Co led a gauge of healthcare stocks to the biggest drop among 10 industry groups in the CSI 300 Index on speculation the government may introduce policies at this month's meeting of the National People's Congress that may curb prices of drugs.

About two stocks climbed for each one that declined in the Shanghai Composite Index, which slipped 2.37 points, or 0.1 percent, to 2426.12 at the close. The gauge swung between gains and losses at least 10 times. The CSI 300 lost less than 0.1 percent to 2633.34.

"There are signs that the slowdown in the economy has been stabilizing, but as an indicator of the economy, the liquidity situation isn't that optimistic and that means the economy hasn't bottomed out yet," said Wang Zheng, Shanghai-based chief investment officer at Jingxi Investment Management Co, which manages about $120 million. "These negative factors will put the rally into doubt." The Shanghai index advanced 5.9 percent in February, capping its biggest monthly gain since October 2010, on the prospect the central bank will add to a cut on Feb 18 in reserve requirements to halt a decline in economic growth.

For the year, the measure has rebounded 10 percent and trades at 10.1 times estimated profit, compared with a record low of 8.9 times on Jan 6, weekly data compiled by Bloomberg showed.

"Sentiment toward Chinese equities has improved," Liu Yang, chairwoman of Atlantis Investment Management Ltd, said on Thursday. "There's reduced panic about China's growth."

Credit Suisse Group AG raised its year-end targets for China's benchmark stock indexes, citing a reduced "equity risk premium". The brokerage increased its estimate for the Shanghai Composite to 3100 from 2900, Vincent Chan and Peggy Chan, analysts at Credit Suisse, wrote in a report on Thursday.

China Shipbuilding, the nation's largest maker of vessel equipment, gained 1.7 percent to 6.15 yuan (98 US cents). Changchun Faway rose 3.2 percent to 23.14 yuan. Guangzhou Shipyard International Co, a unit of China's biggest shipbuilder, climbed 2.6 percent to 17.17 yuan.

The purchasing managers' index rose to 51.0 last month from 50.5 in January, China's statistics bureau and logistics federation reported on Thursday. A reading above 50 indicates expansion. Economic data in the first two months were distorted by a weeklong Spring Festival holiday.

A separate manufacturing index climbed to 49.6 from 48.8, HSBC Holdings PLC and Markit Economics said on Thursday.

GD Midea Holding Co, China's second-biggest publicly traded appliance maker, climbed 2.9 percent to 14.14 yuan. Gree Electric Appliances Inc, the nation's largest maker of home air-conditioners, added 3.2 percent to 20.55 yuan.

Investors should buy consumer discretionary stocks before this month's meeting of the National People's Congress, according to Barclays PLC. Real wage inflation may help consumers spend more on discretionary products, Barclays said in a report dated on Thursday.

Premier Wen Jiabao will target economic growth of 8 percent this year in his report to the NPC in Beijing on Monday, according to eight of 15 economists surveyed by Bloomberg. The People's Bank of China cut lenders' reserve-requirement ratio on Feb 24, the second time since December, to provide credit support to businesses.

Bloomberg News