Shanghai Drops 3%

123jump.com Staff
01 Jul, 2008
New York City

Shanghai Composite Index fell 3% as investors specluate rising interest rates in China and possible slowdown in the economy. Hong Kong stock market were close to celebrate the handover of the island from Britain. Banks and oil refiners led the decline in trading in Shanghai. Chinese foreign exchange reserve rose 18% from a year ago in the first five months to $1.8 trillion at the end of May. The steady rise in foreign exchange has contributed to the elevated inflation.

[R]6:00AM New York, 6:00PM Hong Kong – Manufacturing in June in China slows.[/R]

Hong Kong stock markets were closed today to mark the handover from Britain to China, but markets will resume trading tomorrow. Shanghai Composite Index fell 84.50 or 3.09% to 2,651.65 on sharp declines in banks and oil refiners. Investors are worried that rising interest rates and slowing economic growth are likely to drag corporate profits lower.

China manufacturing slows in June

Bloomberg News reported today that China Federation of Logistics and Purchasing said that the Purchasing Managers'' Index dropped from 53.3 to 52 in June, while index of new export orders declined to 50.2 from 53.4.

In the month, the input-price index rose to 75.7 in June from 73.9 in May. The index of new orders dropped to 52.6 from 55.4. The output index declined to 54.2 from 55.7.

Also a second PMI survey for June, released today by CLSA Asia- Pacific Markets, also observed rising prices and a weaker expansion of manufacturing sector.

Inflation in China to Fall

China Daily online reported on its Website today that the governor of the People’s Bank of China said on the sidelines of the annual general meeting of the Bank of International Settlements that inflation is likely to ease in “the next couple of months” because of goods harvests and the fruition of some supply policies.

Zhou also added that the central bank will use instruments at its disposal such as monetary policy, market operations, central bank bills and reserve requirements in order to stabilize prices when the situation demands.

“But we know prices of energy and other commodities across the globe could put additional pressure on inflation in China,"" said Zhou.

Domestic oil producers urged to increased production

Xinhua News Agency reported today on its Website that Vice Premier Li Keqiang of China has urged producers to increase supplies and asked local governments to cushion sectors and people who are vulnerable from rising oil prices through subsidies.

Li urged companies such as China National Petroleum Corporation and China Petrochemical Corporation and local producers to substantially increase oil output and supplies.