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Shanghai index dives 5.3% on interest rate concerns
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Shanghai's key stock index plunged nearly 5.3 percent today on speculation the government will increase interest rates to help tame inflation.

The Shanghai Composite Index lost 5.29 percent, or 153.42 points, to 2,748.43 at 3pm. The index is comprised of yuan-denominated A shares and hard-currency B shares. The index lost 2.94 percent this week.

Losers in the Shanghai market outnumbered gainers 745 to 33.

The Shenzhen Composite Index, which tracks the smaller domestic stock exchange, was down 6.02 percent, or 50.97 points, to 795.86.

Blue chips across the board suffered sell-offs today. Shanghai Pudong Development Bank Co dropped on concern lending growth will slow. China Vanke Co led property developers lower on concern access to financing for real estate will be restricted. China Petroleum & Chemical Corp and Air China Ltd fell after crude oil traded near a record high.

The Shanghai key index has fallen 48 percent this year on concern official measures to control inflation will hurt earnings growth. The central bank has ordered lenders to set aside a record amount of money in reserve after raising interest rates six times last year.

Profit growth at industrial companies slowed to 20.9 percent in the first five months this year from 42.1 percent a year earlier, the National Bureau of Statistics said today.

Consumer prices rose 7.7 percent in May, down from April's 8.5 percent pace, which was the fastest in almost 12 years. Central bank Governor Zhou Xiaochuan last week said his bank may formulate "stronger policies" to tackle price increases.

Pudong Bank slid 6.28 percent to 22.99 yuan (US$3.34) while Industrial & Commercial Bank of China, the biggest lender in the country, slumped 3.09 percent to 5.01 yuan.

China Vanke, the biggest developer, lost 7.28 percent to 9.04 yuan. Poly Real Estate, the second biggest, shed 9.53 to 13.29 yuan.

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