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China Shares Hit 11-Month Low on Overheating Fears
May 11,2010 17:28CST
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SHANGHAI, May 11 -- Chinese shares hit an 11-month low Tuesday after higher April inflation sparked investor fears of more credit tightening.

The benchmark Shanghai Composite Index lost 51.18 points, or 1.9 percent, to close at 2,647.57 - its lowest level since last May 27.

The Shenzhen Composite Index for China's smaller second exchange fell 2.4 percent to 1,024.65.

Worries about economic overheating were mounting after the government Tuesday reported higher-than-expected bank lending and producer prices for April, while the inflation surged to an 18-month high.

"Investors worry there is a chance of the economy overheating, and that might trigger more government policy tightening," said Huang Xiangbin, an analyst for Cinda Securities in Beijing.

Beijing has announced several rounds of measures to cool housing and consumer prices, including imposing mortgage lending curbs and ordering banks to divert more money into reserves.

Poly Real Estate Group, China's second-biggest developer, declined 2.7 percent to 10.66 yuan, while COFCO Property Co gave up 2.5 percent to 6.92 yuan.

China Life Insurance Co declined 4 percent to 24.3 yuan and Ping An Insurance Co fell 2.9 percent to 46.82 yuan.

Airline shares fell further on concern profits will be hurt by flight cancelations due to the Iceland's volcanic eruption.

Air China Co slumped 6.3 percent to 10.36 yuan. China Eastern Airlines Corp tumbled 5 percent to 7.17 yuan.

In currency markets, the yuan weakened to 6.8277 to the US dollar, down from Monday's close of 6.8257.

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