China Inflation Surges to 12-year High

123jump.com Staff
11 Mar, 2008
New York City

February consumer price inflation in China surged to 8.7%,the highest in 12 years. Severe weather conditions played a key role in lifting food price surge above 25%. Hong Kong stocks recovered from a 2% dip in the morning session to close up 1.3% as bargain hunters braved in. Utilities, insurance, and telecom stocks added. Sinopec fell after a government imposed price freeze on refined products.

[R]6:00AM New York, 6:00PM Hong Kong - China’s inflation rate accelerates to a 12-year high to 8.7% in February.[/R]

Hong Kong stocks recovered from a 2% dip in the morning session to close up 1.3% as bargain hunters bought cheap stocks. Investors looked for defensive stocks including utility stocks.

Market Sentiment

In Hong Kong trading Hang Seng Index rose 1.3%, or 290.30, at 22,995.35, and the China Enterprises index of H shares, or Hong Kong-listed shares in mainland companies, advanced 0.6%, or 68.99, to 12,588.74.

Daily turnover on main board was HK$89 billion compared with HK$87 billion yesterday.

China’s CPI rise

The National Bureau of Statistics reported on its web site today that China’s consumer price inflation increased to the highest in 12 years by 8.7% in February surpassing the estimates of 8.1% to 8.3%.

Chief economist at the bureau Yao Jingyuan said the increase was mainly driven by the rise in food prices and severe weather in Southern China in January and February. Yao added that the relatively low consumer price index at 2.7% that was recorded in February last year was also a contributory factor.

Food prices contributed about 80% of the CPI increase, with food prices increasing 23.3%, and pork prices surging 63.4% and vegetable prices gaining 46%. Conversely, non-food prices rose by only 1.6% year-on-year.

Venture Capital Invest increase 103%

The People’s Daily of China reported today that venture capital in China increased by 103% from a year earlier to $141 million. The figure is however 45% down from January. There were 25 deals compared to 11 in January of last year.

Investments in telecom, media and high technology contributed to 56% of the total figure at $78.75million. Venture capital in China in 2007 rose 5% year on year to a 6-year high to $2.49 billion, with half of the capital invested into the commerce, consumer and retail sectors.

Gainers & Losers

HSBC Holdings plc rose 1.7% to HK$122.90 and Hang Seng Bank climbed 2.6% to HK$141 and Bank of East Asia increased 2% to HK$42.1.

Utilities gained as well. Hong Kong Electric advanced 5.3% to HK$46.85 and CLP Holdings jumped 3.7% to HK$62.85. Oil refiner Sinopec Corp fell further as investors worry the price freezes on refined oil products will continue to be in force, especially after the record rise in inflation.

Its shares pared earlier losses to end down 0.3% at HK$7.52.

Commodity stocks declined on concern over the health of the U.S. economy after Morgan Stanley cut its earnings forecast for the current quarter for large-cap financial institutions to $8.8 billion. Jiangxi Copper shed 1.6% to HK$16.76. Aluminum Corp of China fell 3.2 percent to HK$13.74.