Inflation fight fears

26 January 2010 By Wei Gu

Stocks tumbled 7 percent in the past week, triggered by fears of Chinese tightening and a profit warning from tech bellwether Foxconn. Inflationfearing governments may welcome the correction. But they will still struggle to keep prices under control without hurting growth.

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Share prices in Asia excluding Japan fell 2 percent on Jan. 26, bringing the total loss to 7 percent in the past week. The selling was triggered by fears that China could impose further measures to curb loan growth.

China implemented a planned increase in required reserves for some banks on Jan. 26, according to Reuters. Chinese banks extended 1.45 trillion yuan ($212 billion) in new loans during the first 19 days of 2010 versus 1.6 trillion yuan for the whole month of 2009, local newspaper 21st Century Business Herald reported.

The world's top contract mobile phone maker Foxconn, a unit of Taiwanese electronics giant Hon Hai, said it expected a significant decline in group net profit for 2009 due to a fall in demand and weak pricing.

Separately, the Chinese central bank surprised markets on Tuesday by leaving yields unchanged in its closely watched oneyear bill sale.

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