Money

Markets hit by uncertainty - May 16

By Irene Shen (China Daily)
Updated: 2011-05-17 10:08

Industrial and Commercial Bank of China Ltd fell 1.5 percent to 4.51 yuan, the biggest drop since April 19. On Monday, the bank led losses for lenders after money-market rates jumped the most in three months. [Photo/China Daily]

Stocks retreat as concerns grow over China's inflation prospects

SHANGHAI - Stocks on the Chinese mainland fell for the third time in four days on Monday.

The retreat came after a jump in the nation's food prices fueled concern that inflation will quicken, and as Greece's debt crisis boosted speculation that global economic growth will slow.

Industrial and Commercial Bank of China Ltd (ICBC) led losses for lenders after money-market rates jumped the most in three months.

Related readings:  Chinese shares close down Monday  China stock index futures close down Monday  Inflation data chills markets  Citizens feel inflation biting hard

Anhui Conch Cement Co slid to the lowest level in two months after Goldman Sachs Group Inc said stock gains for makers of building materials may be "muted". Baoshan Iron & Steel Co declined 1.3 percent after Xinhua News Agency said the company faces power curbs in the next three months.

"The market will continue to face downward pressure amid tightening and lack of liquidity," said Chen Liqiu, a strategist at Jianghai Securities Co in Shanghai. "The chance of a rally is slim this year as companies' earnings may not be able to maintain robust growth."

The Shanghai Composite Index lost 22 points to 2849.07 at the 3 pm close. The measure rose 0.3 percent last week, its first advance in four weeks. The CSI 300 Index fell 0.9 percent to 3100.46 on Monday.

The Shanghai Composite has retreated 6.8 percent from a five-month high on April 18 amid concern the central bank will add to four increases in interest rates since early last year to cool inflation. It has also boosted banks' reserve requirements five times this year to mop up liquidity. The gauge has advanced 1.5 percent this year.

China's money-market rate rose on speculation a jump in banks' reserve ratios to a record high will lead to a cash squeeze in the financial system.

The seven-day repurchase rate, a gauge of interbank funding availability, has surged 224 basis points in the past two trading days.

ICBC sank 1.5 percent to 4.51 yuan (69 cents), the biggest drop since April 19. China Construction Bank Corp lost 1 percent to 5.07 yuan.

China still faces inflationary pressure and consumer prices haven't peaked, Shanghai Securities News reported, citing Yu Bin, director-general of the macroeconomic research department of the State Council's development research center.

The economy faces a slowdown, the newspaper cited Yu as saying. On May 14, pork prices in China increased 44 percent from a year earlier due to tight supplies. Egg prices have risen 24 percent from a year earlier, according to Xinhua News Agency ,which cited its own monitoring system.

China's inflation won't recede soon and the government will probably continue to tighten monetary and fiscal policies, the Shanghai Securities News reported, citing an interview with John Lipsky, the first deputy managing director of the International Monetary Fund.

Anhui Conch plunged 4.3 percent to 35.09 yuan, its lowest close since March 15. Goldman Sachs said the "short-term return potential may be muted" for building material and coal stocks. Jiangxi Copper Co lost 1.9 percent to 32.93 yuan.

Greece was expected to ask for a boost in its 110 billion-euro ($155 billion) financial lifeline from European governments and the International Monetary Fund. The talks have been clouded by the arrest of IMF Managing Director Dominique Strauss-Kahn for attempted rape. The euro tumbled to a six-week low last week as Germany put up hurdles to an expanded package. The European Union is China's biggest export market.

Baoshan Iron & Steel slid 1.3 percent to 6.62 yuan, the lowest close since Jan 21. The company will face power curbs from June to September, the official Xinhua News Agency reported, citing an unidentified official with its parent. Hebei Iron & Steel Co slipped 2.7 percent to 4.37 yuan.

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