Stocks dive 2.21% on fears of more measures

By Fu Chenghao  |   2008-6-13  |     NEWSPAPER EDITION

SHANGHAI stocks plunged to close below the 3,000 level on fears that high inflation may trigger further credit tightening by the government, and PetroChina Co hit a fresh low since its listing.

The Shanghai Composite Index dived for a seventh day, losing 2.21 percent to 2,957.53 after an intraday low of 2,900.12. This was the lowest close in nearly 15 months.

The government said yesterday that China's consumer price index for May slowed to 7.7 percent from 8.5 percent in April, but analysts said this news did little to lift the stocks as there had been speculation over the figure in the market earlier in the week.

Also, news on Wednesday of an 8.2-percent rise in the producer price index in May, the highest in more than three years, fanned concerns that consumer prices may rise later in the year.

"The figures just confirmed what the situation is with retail investors. Weakness has now spread to small investors from big ones such as those under the Qualified Foreign Institutional Investors program," Huatai Securities analyst Chen Huiqin said. "It could further fall and I don't expect a rebound this month."

PetroChina, the biggest component in the index, fell 5.66 percent to 15 yuan, the lowest since its November listing, before rallying to end at 15.37 yuan (US$2.23).

The key index has lost 11 percent this week after the central bank announced over the weekend a surprising 1-percent rise in bank reserve requirement ratio. It also fell on fears of high oil prices, large share offerings and weakness in global markets.

Haitong Securities Co tumbled 7.17 percent to 26.8 yuan and Citic Securities Co lost 7.27 percent at 29.84 yuan.

Beijing Tianhong Baoye Real Estate Co added 4.96 percent to end at 14.19 yuan, while Poly Real Estate Group Co gained 1.76 percent to finish at 15.07 yuan.