Markets

Shares fall on inflation, oil

By Zhang Shidong (China Daily)
Updated: 2011-04-26 11:21

Tightening measures will hold back stocks?valuations: Fund manager

SHANGHAI - Stocks on the Chinese mainland fell on Monday, driving the benchmark index to the lowest level this month, as higher oil prices boosted concerns inflation will accelerate and spur more policy tightening measures.

Related readings:  Inflation soaring, Chinese want more tax cuts  Officials warn of further inflation risk in China  Think tank alerts govt on inflation  CASS alerts govt on inflation pressure

Baosteel led declines for steelmakers as oil rose to the highest in two weeks. Anhui Conch Cement Company Ltd and Sany Heavy Industries Co Ltd retreated at least 2.8 percent on concern higher fuel prices may slow economic growth. A gauge of property stocks slid the most in two months after a State researcher said a property tax is needed to reverse imbalances in China's wealth distribution.

"Inflation is still a major concern and there's no sign that the government will relax its tightening," said Wu Kan, a fund manager at Dazhong Insurance Co Ltd, which oversees $285 million. "The tightening will hold back stocks' valuations."

The Shanghai Composite Index dropped 1.51 percent to 2964.95 at the 3 pm close, the lowest since March 31. It declined 1.3 percent last week, the most in three months. The CSI 300 Index fell 1.53 percent to 3249.57.

Baosteel dropped 2.73 percent to 7.12 yuan ($1.09). Hebei Iron & Steel Group Co Ltd slumped 7.47 percent to 4.71 yuan.

Henan Shuanghui Investment & Development Co Ltd slumped 6.96 percent to 58.52 yuan, the lowest since Nov 29.

The company on April 18 confirmed a China Central Television report that an affiliate purchased pigs fed with a banned additive that induces the growth of lean meat.

A measure of consumer staple producers added 0.6 percent, the most among the 10 industry groups in the CSI 300.

Kweichow Moutai Co Ltd surged 3.92 percent to 183.06 yuan. Its first-quarter net income rose 49 percent from the same period a year earlier to 1.88 billion yuan, the company said in a statement in the weekend.

Profit beat the 1.81 billion yuan average of three analysts' estimates compiled by Bloomberg. Wuliangye Group Co Ltd increased 1.16 percent to 32.32 yuan.

China's rising wages will bolster domestic consumption, making travel and hotel stocks attractive investments, according to Hugh Simon, Chief Executive Officer of Hamon Investment Group.

The government's efforts to double salaries over the next five years will boost spending, said Simon.

Wage inflation "is not a bad thing when you are moving your economy away from an export-led economy and gives you a lot of opportunities as an investor", Simon said on Monday.

The Hong Kong-based fund manager said he is also "looking at" airlines and information technology service companies.

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