Inflation fears, Koreas drag down index

08:46, December 23, 2010      

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Shanghai key stock index fell yesterday on concerns over faster inflation after China's top planning body raised oil prices. Sentiment was also weighed down after South Korea announced plans to launch its "largest-ever" live drill yesterday.

The benchmark Shanghai Composite Index lost 0.9 percent, or 26.22 points, to 2,877.90, the fifth decline in six days. Turnover fell to 127.7 billion yuan (US$10.5 billion) from Tuesday's 138.9 billion yuan.

The National Development and Reform Commission raised the retail price of gasoline and diesel by up to four percent on Tuesday reflecting higher crude prices on the international market. It prohibited price hikes for public transport but said that taxi and other transport companies can adjust prices "appropriately" to meet the higher cost.

"The decision may lift the Consumer Price Index by 0.07 percentage point from last month's," said Yin Xiaodong, an analyst with CITIC Securities. "The authorities have already postponed the increase on fast inflation in November. It shows the government's effort to shift economic structure."

South Korea said the live-fire drill will take place today near the border to deter North Korea's provocations.

"The stock market is burdened by both threats from overseas and lack of good news domestically," GF Securities said in a note. "Previous rallies by banks and property developers were not followed by investment. The market will remain weak in the short term."

Auto makers declined on worries higher oil price may heave cost and harm consumer interest. SAIC Motor Co, China's largest car maker, fell 0.8 percent to 16.26 yuan.

Source: Shanghai Daily
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