The Chinese stockmarket had another rough day yesterday with the Shanghai Composite Index below 3,000 points for the first time since April and the main CSI 300 Index shedding another 2%, after a government report showed producer-price inflation accelerated last month.
That was a day after Chinese markets had their biggest tumble since February 2007 after the central bank ordered lenders to set aside record reserves to curb credit growth and inflation.
China and other Asian markets won’t like the $US5 a barrel rise in oil prices to more than $US136 a barrel, or the 200 point, 1.7% fall on Wall Street. That was after a 2% fall across Europe, especially in London which was very weak.
China’s marklets eased yesterday in a region that was mostly higher. That burst of optimism will be reversed today. Australia will be lower as well. Gold rose, but its becoming sidelined by the gyrations in oil.
The Shanghai Composite Index, which tracks the bigger of China’s two exchanges, dropped to 2,992.35 before a small rebound. The last time it dropped below the 3,000 level was on April 22 when the market was in apparent free-fall.
The CSI 300 Index, which tracks Yuan-denominated A shares listed on China’s two bourses, fell 2.1%.
That capped a six day fall that saw the index lose 13% in value; the Shanghai Index lost 1.6% and the Shenzhen Composite Index shed 2.7%.
The Shanghai index plunged 7.7% Tuesday while the CSI 300 Index slumped 8.1%.
The CSI 300 is down over 42% this year, the largest drop among benchmark indexes from the world’s 20 biggest equity markets.
Driving yesterday’s falls was a surprise rise in Chinese Producer Price Inflation in May and an increase in Chinese exports.
Official figures showed a 28.1% rise in overseas sales, compared to a 21.8% rise in April.
Commentators said the increase seems to have eased unrealistic concerns that the Chinese economy might be heading for a sharp slowdown, but inflation remains the key concern.
Imports in may jumped 40%, the biggest rise in four years as the higher value for the Yuan and higher prices for a host of commodities, such as oil, iron ore and coal, boosted import volumes and values respectively.
China has let the Yuan rise more than 5% against the US dollar so far this year, compared to a 7% rise for all of 2007.
That has cut import costs and also put pressure on exporters by making products more expensive in overseas markets.
As a result the trade surplus fell to $US20.2 billion from $US22.4 billion a year ago and less than market forecasts.
At least the trade surplus is heading in the right direction: not so producer prices which rose 8.2% in May, the biggest increase in more.
And Indian shares will fall sharply today after the Reserve Bank of India last night lifted the key official rate for the first time in 15 months. The new level for the repurchase rate is 8%, up from 7.75%.
There are forecasts that inflation in India will jump from just over 8% presently, to around 9.5% in the next few weeks after the Government allowed oil and fuel prices to rise last week.
