Here's why Wilmar got 'spooked' by China's rocketing inflation rate

It hit a 10-month high.

According to OCBC, Wilmar International Limited fell some 3.8% yesterday to S$3.30, likely spooked by news that China’s inflation rate has rebounded to a 10-month high; this after consumer prices rose 3.2% YoY in Feb, driven by a 6% increase in food prices due to the Chinese New Year festivities.

Understandably, the Chinese government is still pretty hawkish with regards to inflation; and this has sparked some concerns over possible monetary tightening to keep a lid on inflation.

Here's more from OCBC:

We note that some quarters were also worried about potential price caps on essential food items such as rice, flour and cooking oil – these are some of the major food items that the company currently distributes in China.

However, market watchers do not expect Beijing to tighten monetary policy just yet, as this may in turn hurt China’s growth.

Recall that the economy grew by only 7.8% last year, in line with official guidance, but the slowest rise in 13 years. Nevertheless, it is fair to assume that some caution has crept back into the market.

As for potential price caps, some market watchers are also of the view that there will not be any in the near term, as food prices are likely to edge lower in the coming months.

In any case, the Food and Agriculture Organization (FAO) of the United Nations recently noted that global food prices were relatively stable in Feb; and the FAO Food Price Index has traded in a narrow 201-212 point range since Nov.

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