Stocks fall on inflation and policy concerns

SHANGAHAI - Stocks on the Chinese mainland fell on Thursday, driving down the benchmark index by the most in a week, on concern higher material prices will fuel inflation and the government's tightening policies are slowing the world's second-biggest economy.

Air China Ltd and China Southern Airlines Co led losses for airlines after an industry group cut its forecast for the carriers' profit because of oil prices. China CNR Corp slid to the lowest this year on investors' speculation that spending in railways will slow. China Merchants Bank Co rose 4.16 percent, leading gains for financial companies, as Sanford C. Bernstein became the latest brokerage to predict lenders' earnings may exceed estimates.

"The inflationary pressure is still there and controlling inflation will be the government's priority throughout the year," said Wu Kan, a Shanghai-based fund manager at Dazhong Insurance Co, which oversees $285 million. "It's difficult for stocks to perform well in an inflationary environment."