Inflation in China Accelerates in May

Mayank Mehta, Chandrasekhar Atreya and Sanjay Barot
11 Jun, 2010
New York City

China stocks rose for the day capping gain for the week, after higher than estimated loan growth and exports confirmed that the nation

[R]5:00 PM Hong Kong, China – Indexes in China traded higher after report of better than expected retail sales and loan growth. Inflation accelerated to 3.1% in May. Developer Poly Real Estate said transaction value declined 22%. BoCom first to offer rights issue as China banks queue up for capital.[/R]

China stocks rose for the day capping gain for the week, after higher than estimated loan growth and exports confirmed that the nation’s economy withstood the looming debt crises emanating from Europe.

The Shanghai Composite Index, tracking the bigger of China’s stock exchanges, rose 0.3% to close at 2,569.94, completing a 0.6% gain for the week. The CSI 300 Index also advanced 0.3% to close at 2,758.87.

Banks extended 639.4 billion yuan new loans in May, according to information posted on central bank’s Web site.

Stocks in Hong Kong also climbed after mainland reports showed a jump is retail sales, industrial production along with a higher than estimated loan growth.

Hang Seng Index advanced 1.2% to close at 19,872.38 extending this week’s total gain to 0.5%, making it a third weekly gain in a row.

Inflation in China accelerated to an annual 3.1% pace in May, while retail sales jumped 18.1% and industrial production gained 16.5%, government reports showed in Beijing today.

U.S. Treasury Secretary Timothy Geithner said that these growth parameters are testimony to the fact that China’s exchange-rate policy needs to be looked into and pegged down artificially.

“China’s exchange-rate policy prevents a balanced global recovery and a free-floating stronger yuan would help officials fend off inflation in the world’s third-largest economy,” Geithner said in his testimony to the Senate Finance Committee, yesterday.

Shanghai Movers

Aluminum Corporation of China Limited, the maker of Aluminum and also called Chalco, added 1.3% to 10.32 yuan.

Bank of China Limited closed unchanged at 3.55 yuan and China Construction Bank Corporation rose 0.6% to 4.80 yuan. Industrial and Commercial Bank of China Limited rose 0.7% to 4.17 yuan.

Poly Real Estate Group Co., Ltd rose 1.1% to 11.18 yuan after the developer recorded a 21.98% month-on-month decline in transaction value from 4.09 billion yuan in April to 3.19 billion yuan in May, according to a report on 163.com, citing a company filing.

Sany Heavy Industry Co., Ltd fell 0.2% to 28.74 yuan after the construction machinery maker announced that it has signed an agreement with SANY Group on June 10 to acquire 100% stake in a Hunan-based automobile company from the group, for 221 million yuan.

[HK Movers

Bank of Communications Co., Ltd rose 2.5% to HK$8.22 after the bank launched its $4.8 billion rights issue this week, the first in a long line of follow-on offerings from the Chinese banking sector.

China Gas Holdings Limited gained 5.2% to HK$3.83 after the supplier of the fuel to mainland homes and businesses was upgraded to “buy” in a new coverage by Goldman Sachs Group Inc.

Esprit Holdings Limited added 1.4% to HK$44.25.

Melco International Development Limited added 4.2% to HK$3.20.

Sands China Ltd, the casino operator, added 1.6% to HK$10.92.