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May 11, 2017

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Shares fall to 7-month low on PPI

SHANGHAI shares tumbled to a seven-month low yesterday after producer price inflation cooled more than expected and concerns lingered over tightening financial regulations.

The Shanghai Composite Index fell 0.9 percent to 3,052.79 points, the lowest close since mid-October.

The gauge has lost 7.18 percent from this year’s high on April 11, as authorities tightened regulations to defuse financial risks and the securities regulator accelerated approval for initial public offerings.

The blue-chip CSI 300 index lost 0.5 percent to 3,337.7 points yesterday, down for the eighth straight session.

The tech-heavy startup board ChiNext fell 1.7 percent to end at a 27-month trough, breaking through for the first time the lowest levels seen during the depths of the 2015 stock crash.

Increase in China’s Producer Price Index slowed further in April, in a sign manufacturing activity may be losing momentum. The soft data, combined with slightly slower growth in manufacturing activity, reinforces analysts’ views that China’s economic expansion remains solid but is starting to moderate after a surprisingly strong start to the year.

China’s reflation cycle in producer prices has probably peaked, and will trend down further, which could drag on economic growth in the second half of the year, said Betty Wang, senior China economist for ANZ in Hong Kong.

“Deleveraging remains the policy focus, regardless of the PPI or CPI trend. We don’t think PPI or CPI will have any significant impact on the current policy direction,” said Wang.

Tougher financial regulations have been a major concern for investors, many of whom fear the measures could go too far and hurt growth in the world’s second-largest economy.

“Financial deleveraging is to prevent risks not trigger risks,” said Liu Dongliang, senior analyst at China Merchants Bank. “How to balance deleverage-defuse measures and financial stability remains a big challenge for the regulators.”

Cement producer BBMG Corp dived 8.12 percent to 6.56 yuan (95 US cents).


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