China Stocks Decline on Inflation Fears

Devan Biswas
02 Nov, 2010
New York City

Stocks in China region fell on the worries that government may be forced to raise rates and tighten home lending. Those fears were underscored today as local economists raise the prospect of faster inflation and India and Australia lifted rates today. Commodities prices edged lower.

[R]8:00 PM Hong Kong – Stocks in China region fell on the worries that government may be forced to raise rates and tighten home lending. Those fears were underscored today as local economists raise the prospect of faster inflation and India and Australia lifted rates today. Commodities prices edged lower.[/R]

Stocks in Shanghai declined as fears of rate increase and further tightening in home lending.

The Shanghai Composite Index declined 0.28% to 3,045.43, the CSI Index fell 0.28% to 3,463.13 and Hang Seng Index in Hong Kong trading increased 18.5 to 23,671.40.

Resource stocks declined on the fall in commodities prices. China Shenhua Energy Co dropped 3% and China Coal Energy Co dropped more than 1%.

The fears of rising inflation have kept investors worried as property prices and gold hover near highs. China Business News reported that the government is expected to cuts its money supply growth target to between 15% and 16% from the current target of 17%.

Though the government has targeted inflation rate at 3% private economists are indicating the inflation to surge closer to 4%.

Australia and India lifted rates and the prospect of rate increase in China dominated trading desks. Australia raised rates to ward off rising inflationary pressures and India lifted rates for the sixth time this year to combat stubborn double digit inflation.

China Shipping soared more than 7% after Essence Securities analyst recommended stock citing 26% increase in shipping rates last month. The news was first reported by Bloomberg News.