Inflation concern weights on Shanghai stocks

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SHANGHAI stocks closed lower today amid worries that inflationary pressure will reduce leeway for monetary easing.

The key Shanghai Composite Index shed 0.41 percent to 2,276.07 points. Daily turnover was 106.4 billion yuan (US$17.2 billion).

"As recent data confirmed the country's economic recovery, most investors have shifted attention to inflation that may rise on growing food prices," Bocom International Holdings said in a report today.

The investment bank put China's inflation rate at 2.3 percent for December, up from 2 percent in November, and predicted the rate will exceed 3 percent in February because prices will go up during the Spring Festival.

"The Chinese government is unlikely to cut the benchmark interest rates or the reserve requirement ratio in 2013 under mounting inflationary pressure," the bank said.

The market also fell in downward correction as the Composite Index reached an overbought level after surging almost 20 percent from a 4-year low of 1,949, according to Xiangcai Securities.

Shanghai Pudong Development Bank fell among lenders, shedding 1.9 percent to 10.12 yuan, after it said its non-performing loan ratio rose 0.14 percentage points last year to 0.58 percent.

ICBC, the nation's largest lender, lost 2.1 percent to 4.14 yuan. China Construction Bank dropped 1.7 percent to 4.65 yuan.

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