Markets

Stocks decline to eight-month low - Thursday

By ZHANG SHIDONG (China Daily)
Updated: 2010-05-07 09:12

Portugal rating

Concern that the Greek fiscal crisis will spread through Europe drove losses among Asian stocks on Wednesday, with the MSCI Asia Pacific Index erasing its gain this year. Moody's Investors Service on Wednesday placed its Portugal rating on review for a possible downgrade. The European Union is China's biggest export destination.

The Reuters/Jefferies CRB Index of 19 raw materials slipped as much as 1.9 percent on Thursday, extending a 2.3 percent retreat a day earlier. Crude oil fell 3.4 percent and copper slid 0.8 percent in New York.

Vanke dropped 4.1 percent to 7.18 yuan, even after reporting its April property sales rose 48 percent from a year earlier. Poly Real Estate Group Co, the second-largest developer by market value, lost 6.7 percent to 10.66 yuan.

Home sales

China's home prices may slump 30 percent as local authorities implement government measures to crack down on property speculation, according to brokerages.

Home sales plunged nearly 40 percent by both units and floor space in 15 major cities last week, extending a streak of declines since mid-April, according to Zheshang Securities Co.

An index tracking 34 property stocks on the Shanghai Composite tumbled 5.2 percent, the lowest close since March 2009.

Related readings:  Greek govt says EU/IMF bailout is 'only hope'  Bubble fears see stocks drop to 7-month low  Tethering the housing bubble  Vanke may hike five-year term loan to $500m

China on May 2 raised banks' reserve requirements for the third time this year, adding to last month's down-payment and interest rate increases on second mortgages after prices rose a record 11.7 percent in March.

"The market needs time to digest policy tightening," Jing Ulrich, JPMorgan Chase & Co's chairwoman for China equities and commodities, said.

April inflation

The inflation rate may have accelerated to between 2.7 percent and 2.8 percent in April, putting pressure on the central bank to raise interest rates this quarter, said Ulrich.

China's April consumer price index will likely rise at a faster pace, while remaining below 3 percent, China Business News reported on Thursday, citing Wang Yuanhong, an economist with the nation's State Information Center.

Inflation data for April is scheduled to be released on May 11. Economists forecast a 2.7 percent gain from a year earlier, up from 2.4 percent in the previous month, according to Bloomberg data.

An interest rate increase for China in the second half of this year remains a possibility, the China Securities Journal said in an editorial. The outlook for inflation is "not optimistic", the Beijing-based newspaper wrote.

Huaxia Bank, partly owned by Deutsche Bank AG, dropped the maximum 10 percent to 11.45 yuan as the shares resumed trading for the first time since April 13. The bank said it plans to raise as much as 20.8 billion yuan ($3 billion) in a private placement to replenish capital.

Chinese banks need to restore capital after extending record loans last year to fuel a recovery in the world's third- largest economy. The government is stepping up scrutiny of banks to prevent last year's credit boom from triggering a financial meltdown.

Industrial Bank Co lost 6.3 percent to 27.56 yuan. China Citic Bank Corp slumped 6.6 percent to 5.50 yuan.

Bloomberg News