Market plunges at midday amid inflation concerns

By Lydia Chen  |   2008-6-12  |     ONLINE EDITION

SHANGHAI'S key stock index fell below the 3,000 point mark in the morning session today despite a government report showing inflation increased at slower pace last month.

The Shanghai Composite Index, which tracks yuan-denominated A shares and hard-currency B shares, lost 3.26 percent, or 103.42 points, to 2,925.94 at 11:30am.

Losers in the Shanghai market outnumbered gainers 678 to 110 while 12 were unchanged.

The Shanghai index has slid since the central bank ordered lenders to set aside record reserves to curb inflation last Saturday.

The Shenzhen Composite Index, which tracks the smaller domestic stock exchange, was down 2.37 percent, or 21.44 points, to 881.59.

China's inflation rate rose at a slower pace of 7.7 percent last month, the National Bureau of Statistics announced this morning.

The consumer price index, the main gauge of inflation, increased 7.7 percent last month year on year, following jumps of 8.5 percent in April and 8.3 in March.

The index jumped to a near 12-year high of 8.7 percent in February.

But investors are concerned that the slower inflation growth may be just a one-off blip and that the CPI is not likely to see sustained drops.

Securities shares were among stocks losing ground this morning amid concerns that a falling market will hurt earnings.

Citic Securities Co, China's biggest publicly traded brokerage, sank 5.47 percent to 30.42 yuan (US$4.40) while Hongyuan Securities lost 4.36 percent to 21.05 yuan.

China Merchants Bank Co, the nation's biggest dual-currency credit-card issuer, fell 2.90 percent to 23.40 yuan. China Merchants said it plans to sell as much as 30 billion yuan of subordinated bonds to raise capital.


Industrial and Commercial Bank of China, the nation's biggest lender, buckled 2.29 percent to 5.13 yuan. Shanghai Pudong Development Bank sank 4.16 percent to 23.70 yuan.