China Slumps Into Bear Market

May 11 (Bloomberg) -- China’s stocks dropped, sending the benchmark index into a bear market, on concern the government will raise borrowing costs to combat inflation and unveil more measures to curb soaring housing prices.
Bank of China Ltd. and China Merchants Bank Co. dropped at least 1.7 percent after a government report showed consumer prices exceeded estimates. Poly Real Estate Group Co., China’s second-largest developer by market value, plunged 2.7 percent as property prices increased at a record pace in April.
“If inflation isn’t contained, the central bank will have to raise interest rates,” said Zhao Zifeng, who helps oversee about $10.2 billion at China International Fund Management Co. in Shanghai. “We’ll still need to gauge housing prices in the coming months as the previous crackdown measures were put in place not long ago. More tightening policies could follow.”
The Shanghai Composite Index, which tracks the bigger of China’s stock exchanges, fell 51.18, or 1.9 percent, to close at 2,647.57, the lowest in almost a year. The measure slid 21 percent from the close of 3,338.66 on Nov. 23, a sign analysts say is a bear market. The CSI 300 Index lost 2 percent today.
The Shanghai index has slid 19 percent this year, the world’s worst performer after Greece among the 93 gauges tracked by Bloomberg, on concern government will increase efforts to curb speculation in the property market, hurting economic growth.