SHANGHAI stocks inched up today amid light trading as investors adopted a cautious stance following data showing producer prices in China fell for a 16th consecutive month.
The benchmark Shanghai Composite Index added 7.18 points, or 0.37 percent, to 1,965.45 as the gains of materials stocks outweighed the losses of homebuilders. Daily trading volume slipped to 52.2 billion yuan (US$8.6 billion).
"The market seesawed today with a shrinking trading volume, indicating a prevailing cautious sentiment," said Qilu Securities.
Donghai Securities attributed part of the market gains to oversold rebound as the liquidity crunch is easing.
China's Consumer Price Index (CPI) in June rose 2.7 percent year on the year, accelerating from 2.1 percent in May and recording the fastest pace since February, the National Bureau of Statistics said today.
China's Producer Price Index (PPI), a major gauge of inflation at the wholesale level, fell 2.7 percent last month from a year earlier, the 16th straight month of decline.
Li Huiyong, analyst with Shenyin and Wanguo Securities, attributed the rebound of inflation to rising food prices and a low comparative base and said "the figure pointed to high deflationary pressure in the manufacturing sector due to dismal demand amid a sluggish economy."
"A moderate inflation leaves leeway for policy stimulus but the government is unlikely to take measures as China shows greater tolerance for slower expansion," Li said.
Gansu Qilianshan Cement Group Co gained among cement producers, rising 6.1 percent to 8.29 yuan as cement prices rebounded slightly last week. China Petroleum & Chemical Corp jumped 4.6 percent to 4.33 yuan.
Most property developers declined. Poly Real Estate, China's second-largest developer, fell 2.8 percent to 10.12 yuan. Gemdale Corp slumped 4.4 percent to 6.79 yuan.