Investors discuss market trends at a brokerage in Fuyang, Anhui province. The National Development and Reform Commission will draw up a plan to curb "substantial" gains in medicine prices and curb profiteering. Lu Qijian / for China Daily
SHANGHAI - Mainland stocks fell the most in three weeks as pharmaceutical, technology and consumer companies slumped on concern valuations are excessive given the prospect of further monetary tightening and slowing economic growth.The Shanghai Composite Index dropped 47.02, or 1.8 percent, to close at 2,513.22, after touching its lowest level since April 2009. The decline was the biggest since May 31 and capped a 2.2 percent loss for the week, when mainland markets were shut for the first three days.
Trading volumes on the Shanghai stock market on Thursday were the lowest since Dec 31, 2008, according to Bloomberg data.
The CSI Smallcap 500 Index, which tracks smaller companies, slid 4.2 percent on Friday, the most since May 17.
Drugmakers down
Harbin Pharmaceutical lost 5.8 percent to 19.06 yuan ($2.79), paring its gain to 3.2 percent this year. Tianjin Tasly Pharmaceutical Co tumbled 8 percent to 27.57 yuan, the steepest loss since June 2008. Beijing Tongrentang Co, a manufacturer of traditional Chinese medicine, fell 5.4 percent to 24.49 yuan.
The National Development and Reform Commission will draw up a plan to curb "substantial" gains in medicine prices and curb profiteering, the planning agency said on Thursday after the market closed.
"Mounting evidence is pointing to a more stringent policy for drug pricing," BofA-Merrill Lynch Global Research analysts Shaojing Tong and Binnie Wong said on Friday. "We caution investors of potential headline risks for drug-related stocks, especially after their impressive outperformance" in the first half, they wrote.
Inflation is likely to remain contained this year, the World Bank said in a quarterly report on the Chinese economy on Friday. China should make more use of the exchange rate and interest rates to help manage its economy and reduce the risks from surging housing prices and overinvestment, it said.
China should return to a normalized monetary policy in the second half of the year, Xia Bin, one of the People's Bank of China's academic advisers, said in Shanghai.
Shanghai Zhangjiang Hi-Tech Park Development Co gained 4 percent to 9.78 yuan, the most since April 21. The company said it will spend 1.02 billion yuan to form an investment company. The new unit will invest in the health-care and financial industries, it said.
Hang Seng gains
Hong Kong stocks advanced, driving the Hang Seng Index to its longest winning streak in more than four years, as a Spanish bond sale eased concerns about Europe's debt crisis.
The Hang Seng Index closed 0.7 percent higher at 20,286.71 in Hong Kong, the highest level since May 13. The index has risen 2.1 percent in the past five days, the most since the week ended April 9. The Hang Seng China Enterprises Index of Chinese companies' H-shares added 0.3 percent to 11,622.69.
