Money

Stocks fall on inflation and policy concerns

By Zhang Shidong (China Daily)
Updated: 2011-03-04 11:13

SHANGAHAI - Stocks on the Chinese mainland fell on Thursday, driving down the benchmark index by the most in a week, on concern higher material prices will fuel inflation and the government's tightening policies are slowing the world's second-biggest economy.

Air China Ltd and China Southern Airlines Co led losses for airlines after an industry group cut its forecast for the carriers' profit because of oil prices. China CNR Corp slid to the lowest this year on investors' speculation that spending in railways will slow. China Merchants Bank Co rose 4.16 percent, leading gains for financial companies, as Sanford C. Bernstein became the latest brokerage to predict lenders' earnings may exceed estimates.

"The inflationary pressure is still there and controlling inflation will be the government's priority throughout the year," said Wu Kan, a Shanghai-based fund manager at Dazhong Insurance Co, which oversees $285 million. "It's difficult for stocks to perform well in an inflationary environment."

Related readings:  Inflation concerns drive markets lower  Economist spotlights inflation, growth  Insecurity about social security biggest concern  China's bonds are worst BRIC performers

The Shanghai Composite Index slid 0.37 percent to 2902.98 at the 3 pm close on Thursday. The CSI 300 Index slipped 0.67 percent to 3221.72.

Air China dropped 1.8 percent to 11.47 yuan ($1.75). China Southern Airlines slid 2.07 percent to 8.51 yuan.

China CNR fell 3.12 percent to 7.77 yuan, the lowest since Dec 31. China Railway Construction Corp lost 0.42 percent to 7.05 yuan.

A gauge of financial companies in the CSI 300 gained 0.9 percent, the only industry group to advance. China Merchants Bank rose 4.16 percent to 14.03 yuan. Industrial and Commercial Bank of China Ltd advanced 0.47 percent to 4.30 yuan. China Construction Bank Corp climbed 1.44 percent to 4.94 yuan.

China Gezhouba Group Co, an engineering construction company, slumped to the lowest in five weeks, losing 3.45 percent to 13.17 yuan. The company halted a 5.54 billion yuan project in Libya and evacuated 1,060 workers.

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