6:00AM New York, 6:00PM Hong Kong - China consumer prices increase 7.7% in May. Yuan rises to record high. Trade surplus for May and for the year declines.

Stocks in Hong Kong fell as worries on inflation and the effects of Beijing’s monetary tightening measures hovered market sentiment.

Market sentiment

In Hong Kong trading Hang Seng Index dropped 1.30% or 303.74 at 23,023.86, and the China Enterprises Index of Hong Kong listed mainland shares fell 1.42% or 180.14 to 12,522.89. In Shanghai trading CSI 300 Index slumped 1.77% or 55.67 at 3.084.63.

Daily turnover on main-board was HK$77.4 billion compared to HK$62.91 billion yesterday.

China consumer prices increases 7.7% in May

The National Bureau of Statistics reported that China’s consumer price index rose 7.7% in May from 8.5% in April. According to the bureau, the CPI increased 7.3% in urban areas and 8.5% in rural areas.

Food prices gained 19.9% in May but were 2.2 percentage points down from April. Meat advanced 37.8% as pork increased 48%, cooking oil surged 41.4%, vegetables increased 10.3%, aquatic products spiked 18.3% and grains spurred 8.6%.

The NBS reported that in the first five months of this year, the inflation indicator rose 8.1% from the same period a year ago, and in the urban areas gained 7.7% and in rural areas increased 8.8%.

Producer prices rise 8.2% in May

The NBS also noted that the producer price index advanced 8.2% year-on-year in May from 8.1% in April.

""The rise in producer price inflation will seep into the consumer price inflation zone and mount pressure on policymakers battling inflation,"" said economist with Central University of Finance and Economics, Guo Tianyong.

China’s trade surplus fell in May and for the year

The China Daily Online reported today that according to statistics from China Customs, the value of imports and exports between January and May spiked 26.2% to $1.01 trillion from last year.

Export increased 22.9% to $545.05 billion, while the import gained 30.4% to $467.03 billion.

On the overall, the cumulative total trade surplus fell 8.6% to $78.02 billion from a year earlier, but the trade surplus dropped 9.9% to $20.21 billion.

Yen rises to record high

Xinhua News Agency reported today that according to the China Foreign Exchange Trading System the yuan rose to 6.9015 yuan against the dollar.

However in today’s trading the currency shed 200 basis points against the euro to 10.7225 yuan and 66 basis points against yen when the Japanese currency closed at 6.4485 yuan for 100 yen.

Gainers & Losers

Telecommunication stocks extended gains on expectations that China might grant a 3G licence to China Mobile and small players as well. China Unicom and China Netcom increased. However, China Mobile edged down 1.1% to HK$107.70.