Bloomberg sums it best,
The Shanghai Composite dropped 4.6 percent this week, halting a six-week rally, following government reports showing inflation is accelerating and that the government may further increase rates after boosting borrowing costs last month.
Consumer prices jumped 4.4 percent in October, the fastest pace in two years, and more than the 4 percent median forecast in a Bloomberg News survey of 28 economists, according to the statistics bureau yesterday. September prices rose 3.6 percent. The government’s full-year inflation target is 3 percent.
The People’s Bank of China on Nov. 10 ordered an increase in bank reserve requirements by 50 basis points from Nov. 16, the first nationwide boost since May. Some lenders, including Bank of Communications Co., have to lift their reserve ratios by an additional 50 basis points from Nov. 15, a person with direct knowledge of the matter said yesterday.
“There’s talk of an interest-rate hike over the weekend,” said Wu Kan, a Shanghai-based fund manager at Dazhong Insurance Co., which oversees $285 million. “It’s quite possible given how inflation has accelerated.”