China's stocks plunge on rate hike fears

China's benchmark stock index plummeted on Friday, with property and resources stocks bearing the brunt of the selling amid mounting fears that the central bank would hike interest rates further to check spiraling inflation. The Shanghai Composite Index ended down 5.15% to shut shop at 2,985.44, after falling as low as 2,975. It earlier touched a day's high of 3,150 after opening at 3,121. This was the biggest single day fall for the index in more than a year. The CSI 300 Index plunged 6.2% to close at 3,291.83. The Shenzhen Composite index tumbled 6.1% to 1,296.96, after sliding as low as 1,294.44.



Bank of China slid the most in five months and China Vanke Co., the nation’s largest developer, also plunged. Home prices in 70 cities climbed 8.6% from a year earlier, the statistics bureau said on Nov. 10. Separately, the Securities Times reported that China’s housing ministry and foreign exchange regulator have issued rules that will limit foreigners to buy one residential property for self use. Jiangxi Copper and Aluminum Corp. of China tumbled in the wake of a steep drop in commodities futures.

The Shanghai Composite lost 4.6% this week, halting a six-week rally, after government reports showed that inflation is accelerating. Consumer prices jumped 4.4% in October, the fastest pace in two years, and more than the 4% median forecast. September prices rose 3.6%. The government’s full-year inflation target is 3%.

The People’s Bank of China on Nov. 10 ordered an increase in bank reserve requirements by 50 basis points from Nov. 16, the first nationwide boost since May. Some lenders, including Bank of Communications Co., have to lift their reserve ratios by an additional 50 basis points from Nov. 15. The central bank raised rates last month for the first time since 2007.