Inflation worries prompt investors to sell

08:45, January 25, 2011      

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Shares in Shanghai yesterday extended last week's decline as rising pressure over inflation prompted wary investors to sell their positions before the market closes for a week for the Spring Festival.

The benchmark Shanghai Composite Index shed 0.7 percent to end at 2,695.72.

Resources shares were among the worst performers on concerns that demand for commodities would be crimped as China's economic growth may slow due to additional monetary tightening measures.

Prices of nonferrous metals in global markets are expected to fluctuate over the short term as demand from China, the world's biggest consumer of metals, will shrink due to the Spring Festival holiday which starts on February 2 and ends on February 8, China International Capital Corp said in a note yesterday.

Yanzhou Coal Mining tumbled 5.7 percent to 24.07 yuan. Jiangxi Copper Co fell 2.7 percent to 35.72 yuan.

The Shanghai market is expected to continue performing weakly at least before the holiday, said Zhong Hua, an analyst at Guotai Junan Securities.

"Inflation will still be the biggest pressure on the market," Zhong said. "Small caps will be the casualties in face of more tightened liquidity policies.

China's Consumer Price Index, a main gauge of inflation, may rise 5.5 percent in January, compared with December's 4.6 percent, according to CICC.

Source: Shanghai Daily
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