China’s stocks listed in the U.S.
retreated from a one-month high after the nation raised interest
rates for the third time this year to tame inflation that has
quickened to the fastest pace since 2008.

The American Stock Exchange China Index, which tracks
equities and American depositary receipts of Chinese companies,
slid 0.9 percent at 11:32 a.m. in New York after an eight-day
gain sent the gauge to the highest since June 2. China Yuchai
International Ltd. (CYD), a diesel engines maker, and Sohu.com Inc.,
the owner of China’s fourth-most visited website, were among the
decliners.

China’s interest-rate increase “will probably make people
think a little about whether they’re going to put more money
into China,” Douglas Gonzalez, a vice president of trading at
Cicerone Securities LLC in New York, said by phone. “The
Chinese have to have a better grip on their inflation. That’s
exactly what they’re doing.”

Chinese Premier Wen Jiabao said last month that the
government may not reach an annual inflation target of 4 percent
after the rate was 5.2 percent in the first five months. Besides
raising rates, policy makers have boosted banks’ reserve
requirements to record levels, restricted mortgages and home
purchases, and allowed gains by the yuan against the dollar.

The Bank of New York Mellon China ADR Index measuring
American depositary receipts lost 1 percent to 440.23 after
advancing yesterday to the highest level in more than a month.
Today’s drop is the first in nine days. It’s up 3.7 percent this
year. During the same period, ADRs for Brazilian companies lost
3.6 percent, while those for Russia declined 12 percent, and
India’s lost 7.8 percent.

Rate Increases

The People’s Bank of China lifted its benchmark one-year
lending rate by a quarter point to 6.56 percent, starting
tomorrow. The one-year deposit rate rises to 3.5 percent from
3.25 percent.

The rate increase is likely to be the last this year as
inflation may slow in the coming months, said Yu Song, a Hong
Kong-based analyst at Goldman Sachs Group Inc. in a note today.

“The government is reluctant to use the tool too often for
concerns on potential hot money inflows amid a widening
domestic-international interest rate spread and the negative
impact on real economic activities,” Song wrote.

Oil futures fell from a three-week high on concern that
slower global growth will crimp fuel consumption.

To contact the reporter on this story:
Belinda Cao in New York at
Lcao4@bloomberg.net

To contact the editor responsible for this story:
David Papadopoulos at
papadopoulos@bloomberg.net