China shares hit 19-month low on economic fears

China's benchmark Shanghai Composite Index fell 5.2 percent Monday following the release of economic data showing wholesale price inflation jumped to its highest level in 12 years in July.

The Shanghai index closed at 2,470.07 on Monday, down 135.65 points. That was its lowest close in more than a year and a half.

The Shenzhen Composite Index of China's smaller, second market plunged 6.6 percent to 698.37.

Airlines, textile exporters and refiners led the decline. Two of three major publicly traded airlines dropped by the daily maximum 10 percent.

The government reported Monday that the producer price index rose 10 percent in July over a year earlier, its highest rate of increase since 1996 and a jump over June's 8.8 percent rate. Such increases, fueled by rising energy and raw materials costs, add to pressure on consumer prices, complicating Beijing's effort to rein in politically sensitive inflation.

Chinese investors have become increasingly jittery over the economic outlook amid signs that the malaise afflicting the U.S. and Europe might be spreading to Asia, with corporate earnings bound to suffer. Analysts said the start of the Beijing Olympics last week had quashed any lingering hopes for a games-related rally.

"Investors still think the market is weak," said Qian Qimin, a strategist at Shenyin Wanguo Securities. "They are disappointed," he said.

So-called "B-shares," which are denominated in U.S. dollars and take up only a small segment of market volume, fell sharply in Shanghai, dropping 9 percent and helping to pull the composite index lower.

Stricter foreign exchange controls and a strengthening of the U.S. dollar against the Chinese yuan could be leading speculative investors to pull out investments that had been targeting gains in the local currency, said Zhang Linchang, a strategist at Guotai Junan Securities in Shanghai.

"It's hard to calculate, but it's possible that hot money is leaving China because of that," Zhang said.

The U.S. dollar was trading at 6.8583 around 0800 GMT on the over-the-counter market, down from Friday's close of 6.8592.

In share trading, a steadying of global crude oil prices failed to buoy airlines amid concern over weakening passenger demand.

Among the airlines hitting the daily downside limit, flag carrier Air China ended at 7.82 yuan and China Eastern Airlines dropped to 6.17 yuan. China Southern Airlines dropped 9.9 percent to 6.09 yuan.

China Eastern Airlines announced late Sunday that a deal to sell a strategic stake to Singapore Airlines and Temasek Holdings, the investment arm of the Singaporean government, was off after they failed to meet Saturday's deadline for reaching a final agreement.

Oil refiner China Petroleum & Chemical Corp. fell 5.4 percent to 10.69 yuan and PetroChina plunged 5.54 percent to 13.80.

Aluminum giant Chinalco also fell by the 10 percent limit, to 10.38 yuan. Property developer China Vanke slumped 5.6 percent to 7.11 yuan.

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Bonnie Cao in Beijing contributed to this report.