Index plummets on deflation fears
By Ye Zhen |
July 10, 2012, Tuesday
|
Print Edition
Print Edition
SHANGHAI shares plunged by the most in a month yesterday, sending the key index to a six-month low, as lower-than-expected inflation data fueled concern over economic deflation.
The Shanghai Composite Index slumped 2.37 percent to settle at 2,170.81, the biggest drop since June 4.
The Consumer Price Index rose 2.2 percent in June from a year earlier, the slowest pace in 29 months, the National Bureau of Statistics said yesterday.
"Inflation is falling faster than expected. If it continues to slide at the current speed, there is a risk of deflation," said Liu Ligang, ANZ Bank's chief economist for China.
The Production Price Index fell 2.1 percent from a year earlier, dropping for the fourth consecutive month.
"The decline in commodity prices in the global market and the continued weakness in domestic demand contributed to the fall in PPI, which has been below zero for four months, indicating that the risk of deflation is mounting," Qu Hongbin, chief economist for China at HSBC Holdings Plc, wrote on his Weibo yesterday.
Banks posted a weak run on speculation the asymmetrical cut in interest rates may hurt their earnings. The Industrial and Commercial Bank of China, the nation's largest lender, dropped 2.8 percent to 3.80 yuan (60 US cents). China Merchants Bank slumped 4 percent to 10.15 yuan.
China Petroleum and Chemical Corp, the nation's largest oil refiner and also known as Sinopec, shrank 4.6 percent to 5.80 yuan, the lowest level since the financial crisis in 2008.
The Shanghai Composite Index slumped 2.37 percent to settle at 2,170.81, the biggest drop since June 4.
The Consumer Price Index rose 2.2 percent in June from a year earlier, the slowest pace in 29 months, the National Bureau of Statistics said yesterday.
"Inflation is falling faster than expected. If it continues to slide at the current speed, there is a risk of deflation," said Liu Ligang, ANZ Bank's chief economist for China.
The Production Price Index fell 2.1 percent from a year earlier, dropping for the fourth consecutive month.
"The decline in commodity prices in the global market and the continued weakness in domestic demand contributed to the fall in PPI, which has been below zero for four months, indicating that the risk of deflation is mounting," Qu Hongbin, chief economist for China at HSBC Holdings Plc, wrote on his Weibo yesterday.
Banks posted a weak run on speculation the asymmetrical cut in interest rates may hurt their earnings. The Industrial and Commercial Bank of China, the nation's largest lender, dropped 2.8 percent to 3.80 yuan (60 US cents). China Merchants Bank slumped 4 percent to 10.15 yuan.
China Petroleum and Chemical Corp, the nation's largest oil refiner and also known as Sinopec, shrank 4.6 percent to 5.80 yuan, the lowest level since the financial crisis in 2008.
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