China Inflation Worries as Manufacturing Indexes Advance

Bikram Pandey
01 Feb, 2011
New York City

Market indexes in China closed lower ahead of a week of Chinese Lunar Year holiday. The latest read on manufacturing indicated slower growth expansion but input prices surged at a faster pace sparking fears of inflation. Resource linked stocks surged as copper and crude oil rallied to a 2-year high.

[R]5:00 PM Hong Kong – Market indexes in China closed lower ahead of a week of Chinese Lunar Year holiday. The latest read on manufacturing indicated slower growth expansion but input prices surged at a faster pace sparking fears of inflation. Resource linked stocks surged as copper and crude oil rallied to a 2-year high.[/R]

Fears of rising inflation gripped markets in China, Indonesia and India and commodities prices staged a two-day rally.

Market indexes edged up on the last day of trading ahead of Chinese Lunar Year holiday and the yuan gained against the dollar to 6.5937.

Hang Seng Index increased 35.61 to 23,482 and CSI 300 increased 0.77 to 3,077.28. Markets are scheduled to be closed from tomorrow for the rest of the week. Trading volume was at its low in Hong Kong and Shanghai trading for the year.

Two separate indexes tracking China’s manufacturing index indicated expansion.

The index published by logistic federation and the National Bureau of Standards that tracks activities at 820 companies increased to 52.9 in January.

The index published by HSBC Holdings Plc and Markit Economics increased to 54.5 in the month from 54.4. The index tracking input prices increased to 69.3 from 66.7 in December as food and energy prices rose at the sharpest in the month in three years.

Both indexes above 50 show expansion and the prospect of interest rate increase after a week of Chinese Lunar Year holiday rose.

In a separate report, home prices in January increased 1% from December according to the property website SouFun Holdings Ltd. China recently increased the down-payment to 60% from 50% for second homes.

China Gas Holdings Ltd dropped 14% to HK$2.91 after Hong Kong police arrested its managing director for financial irregularities.

Stocks Movers

Resource linked stocks closed higher in China region trading as crude oil and copper surged in a two-day rally.

Crude oil for March delivery increased 3% in London trading to $100.28 and copper, zinc and aluminum gained more than 2%. Crude oil in New York traded up 64 cents to close at $91.55.

PetroChina Co. gained 2.5% to HK$11.10 and Cnooc Ltd increased 2.6% to HK$17.61.

China CSR Corp declined 1.8%.