6:00AM New York, 6:00PM Hong Kong - Hong Inflation rises to 5.7% in May and may increase on a rise in recent fuel prices.

Hong Kong stock indexes closed flat in volatile trading as investors took heed of indications that Peoples’ Bank of China will further tighten measures in an attempt to rein in on resurgent inflationary pressures.

Market sentiment

In Hong Kong trade Hang Seng Index fell 0.13% or 30.64 at 22,714.96, and the China Enterprises Index of Hong Kong listed mainland shares, or H shares, declined 0.87% or 107.23 at 12,236.31. In Shanghai trading CSI 300 Index plummeted 2.10% or 59.73 at 2,789.94.

Daily turnover on main-board was HK$59.68 billion compared with HK$72.69 billion on Friday last week.

Hong Kong inflation accelerates to 5.7% in May

The Census and Statistics Department said on Friday Hong Kong’s overall consumer prices accelerated to 5.7% in May from 5.4% in the previous month. Rising food prices and housing cost lifted the inflation index.

Pork prices gained 56.8% year-on-year, while beef spiked 50%, canned meat grew 45.7%, rice climbed 39.9%, edible oils surged 36% and other meat rose 30.5%. Fresh-water fish prices increased 23%.

Year-on-year price increases were also recorded for electricity, gas and water; meals bought away from home, housing, miscellaneous goods, transport, clothing and footwear, and, alcohol and tobacco.

China to rein in on price increases

The National Development and Reform Commission urged in a statement on Saturday price regulators to tighten price monitoring and control the price increase of other industrial products after the hike in energy prices last week. NDRC also encouraged producers to cut production costs rather than increase prices and urged local government to cut administrative fees paid by producers.

Deputy head of NDRC pricing department Xu Kunlin said the price increases will not impact on the inflation rate as “prices directly related to people''s livelihood remain unchanged”.

Kunlin added that cost increases for producers after the rise will not go beyond the production sector because of the over-supply situation of consumer products.

Gainers & Losers

Aluminum Corp of China fell 5.7% after the company said its first-half net profit will decline 50%.

CNOOC jumped 1.6% as crude oil price rose on rising tensions in the Middle East as Israel conducts military exercises that many believe are prelude to an attack to Iranian military installations.

China Mobile increased 1%. Foxconn International Holdings slipped 4.7% at HK$9.39 on concern Motorola Inc market share is on the decline.

CLP Holdings increased and Hong Kong Electric rose 1.8% and 0.3% respectively.

Hong Kong''s Cathay Pacific advanced 1.3% on expectations that OPEC might hike output of crude oil after the summit in Jeddah, Saudi Arabia.

Financial stocks in Hong and the mainland also rose as well. Hang Seng Bank increased 2.1%, BOC Hong Kong rose 0.8%, while ICBC gained 0.4% and China Construction Bank jumped 0.8%.

Sinopec Corp slipped 2.4% on speculation that the recent increases in energy prices were insufficient for the refiner to break even.