Mainland stocks had their biggest drop in three weeks after the central bank's governor said interest rates could be raised if inflation keeps rising, state media reported. The CSI 300 Index fell 4.5%, closing at 3877.59. Zhou Xiaochuan, head of the People's Bank of China, said Saturday that a third rate hike was possible if the consumer price index (CPI), a key inflation indicator, continued to rise. The central bank raised the one-year deposit rate by 27 basis points to 3.06% on May 19. Also in May, the CPI rose to 3.4% year-on-year, its highest in two years, because of high pork and poultry prices. Economists have forecast that the CPI could surpass 4% this year, and have expected a minor rate hike from the central bank in response.
In other market news, Sinopec's Shanghai-listed shares fell 5.7% yesterday after news broke of the sudden resignation of chairman Chen Tonghai, the Wall Street Journal reported.