1970-01-01 08:33:27
DOMESTIC stocks fell, snapping a seven-day rally, after Premier Wen Jiabao said lending curbs should be stepped up to tame inflation in the world's fastest-growing major economy.
China Vanke Co, the nation's biggest listed property developer, and Industrial & Commercial Bank of China Ltd, the largest lender, led the decline, Bloomberg reported.
"It's only a matter of time before the government raises interest rates or reserve requirement ratios to mop up excess liquidity,'' said Yan Ji, an investment manager at HSBC Jintrust Fund Management Co in Shanghai, which manages about US$517 million.
"That may siphon some money away from equities."
The benchmark CSI 300 Index, which tracks yuan-denominated A shares listed on two exchanges on the Chinese mainland, fell 42.45, or one percent, to 4075.82 at the close, after sliding as much as 2.3 percent.
The measure surged 17 percent over the previous seven sessions.
China Vanke declined 0.60 yuan (7.9 US cents), or 3.1 percent, to 18.95 yuan. ICBC slid 0.15 yuan, or 2.8 percent, to 5.13 yuan, while Bank of China Ltd, the second-largest lender, fell 0.13 yuan or 2.4 percent to 5.27 yuan.
Monetary policy needs a "moderate tightening," Wen said, after reports this week showed inflation accelerated to a two-year high of 3.4 percent in May and money-supply growth stayed above the central bank's 16 percent target for a fourth month.
Industrial production rose at the fastest pace in three months, while home prices posted their biggest increase since November 2005, according to official figures released today.
The People's Bank of China has raised interest rates twice this year and ordered commercial lenders five times to set aside more money as reserves to drain liquidity and cool the economy
The CSI 300 is about 100 points away from its record close on May 29, after tumbling as much as 22 percent from the high following a tripling of stamp duty. It took about a month to recoup a single-day loss of 9.2 percent on February 27, the biggest slide since the index was introduced in April 2005.
"The government will probably use some market-orientated ploys, such as new share sales, to tame the market in the Insurers such as Ping An Insurance (Group) Co rose on expectations higher interest rates will boost investment returns.
Ping An Insurance, China's second-biggest insurer, rose 0.76 yuan, or 1.2 percent, to 64.43 yuan. China Life Insurance Co, the nation's largest, added 0.02 yuan, or 0.1 percent, to 37.64 yuan.
About 15 percent of Ping An's assets and 33 percent of China Life's were in banking deposits at the end of 2006, according to their annual reports.
The Shanghai Composite Index, which tracks the bigger of the mainland's stock exchanges, dropped 1.5 percent to 4115.21. The Shenzhen Composite Index, which covers the smaller one, retreated 1 percent to 1221.17.
Shanghai Daily News