By Patrick Chu Jan. 21 (Bloomberg) -- Chinese stocks slid and a measure of the country’s interest rates rose after China’s economic growth accelerated at the fastest pace since 2007, increasing pressure on the government to rein in growth and stanch inflation. The Hang Seng Index dropped 0.6 percent to 21,149.14 and the Shanghai Composite lost 0.3 percent to 3,143.11. The MSCI Asia Pacific Index rose 0.02 percent to 124.24 at 1:30 p.m. in Tokyo. China’s one-year swap rate, the fixed cost for receiving a floating interest rate, climbed 3 basis points to 2.32 percent. U.S. stock futures and metals prices climbed. The world’s fastest-growing major economy expanded 10.7 percent in the fourth quarter, underscoring comments by China’s chief banking regulator Liu Mingkang, who yesterday said he ordered some of the nation’s banks to reduce lending. Developing Asian economies face the risk of asset bubbles and overheating as the region’s growth outpaces the rest of the world, the World Bank said in its global economic forecast today. “The economic data may be strong but that will only lead investors to believe the government will impose additional tightening measures, such as interest rate increases,” said Zhang Kun, a strategist at Guotai Junan Securities Co. in Shanghai. “We may be at the start of a market correction.” Five stocks declined for every four that rose on the MSCI Asia index. Standard & Poor’s 500 Index futures rose 0.3 percent following a 1 percent drop in regular U.S. trading in New York. Industrial & Commercial Bank of China Ltd. and China Construction Bank Corp. sank at least 1.5 percent in Hong Kong. Santos Ltd., Australia’s third-largest oil and gas producer, declined 1.7 percent after fourth-quarter sales dropped. BHP Billiton, the world’s largest mining company, fell 1.3 percent after commodities prices fell in New York yesterday. Korean Shippers STX Pan Ocean Co. and Korea Line Corp., South Korea’s biggest bulk carriers, fell more than 2.3 percent after the Baltic Dry Index declined for a third day. LG Display Co. and Hynix Semiconductor Inc. both rose more than 3.2 percent after reporting a fourth-quarter profit compared to losses a year earlier. The Taiwan dollar climbed 0.4 percent, the most in two weeks, to NT$31.91, after a government report showed export orders rose 52.6 percent from a year earlier, accelerating from 37.1 percent gain in November. Greek bonds tumbled yesterday, pushing the two-year yield up by the most since before the country adopted the euro, on mounting concern the country won’t be able to fund the European union’s biggest deficit. The euro sank to a five-month low against the dollar and the weakest in one month versus the yen on concern Greece’s fiscal problems will weigh on the currency’s 16-nation economy. Treasuries Gain Benchmark 10-year Treasuries rose, sending yields to near the lowest in a month, after disappointing corporate earnings in the U.S. boosted demand for the relative safety of government debt. The Dollar Index, used by IntercontinentalExchange Inc. to track the greenback against the six major counterparts, increased 1.1 percent, the most since Dec. 4, as investors sought dollar-based assets as a refuge. Copper for three-month delivery pared its advance after the Chinese economic numbers were released. The metal rose 1 percent at $7,446 a metric ton in Asia after earlier gaining as much as 1.5 percent. Gold futures tumbled the most in a month yesterday as the dollar’s advance reduced demand for the precious metal as a store of value. Oil traded below $78 a barrel after dropping 2 percent to a four-week low on the stronger dollar and on speculation oil inventories increased in the U.S. The UBS Bloomberg Constant Maturity Commodity Index fell 1.4 percent to 1,304.85. Gold Falls Gold futures for February delivery fell $27.40, or 2.4 percent, to $1,112.60 an ounce on the Comex division of the New York Mercantile Exchange, the biggest decline for a most-active contract since Dec. 17. Crude-oil futures for February delivery fell $1.40 to $77.62 a barrel on the Nymex, the lowest settlement since Dec. 23. The contract expired yesterday. The cost of protecting Asia-Pacific bonds from default rose. The Markit iTraxx Asia credit swap index of 50 investment-grade borrowers outside Japan climbed 3 basis points to 101 basis points, Royal Bank of Scotland Group Plc prices show. That’s the highest since Dec. 18, according to CMA DataVision. Columbia University professor Joseph Stiglitz, a Nobel Prize-winning economist, said the U.S. should inject a second round of stimulus spending into the economy to avert a “double- dip” recession. Bearish Outlook It will be “2012 or 2013 at the earliest that we will be back to normality,” Stiglitz said in an interview yesterday on Bloomberg Television. “This is a scenario that is putting us a little better but not much better than the Japanese malaise.” Stiglitz said state governments face a shortfall of $200 billion per year in tax revenue that stimulus spending should fill. Other priorities should be writing down principal on underwater mortgages and passing new financial regulation legislation, which Stiglitz said would be difficult to accomplish. Stiglitz’s concern contrasts with Warren Buffett’s outlook. Buffett said today on Bloomberg Television, “I do not know when things will get better. I have never been more optimistic about the future of the United States and the world.” The finance industry “did not allocate financial capital well but boy did they use their political capital well,” Stiglitz said. “They bought deregulation, they got bailouts that were on very favorable terms and now they’re being quite successful in fighting the restructuring of the regulatory framework.” The World Bank raised its forecast for global growth in 2010 and warned that the recovery may lose momentum in the second half of the year as government stimulus programs wind down and unemployment persists. Global Forecast The world economy will expand 2.7 percent this year after the worst recession since the end of World War II, compared with an estimate in June of a 2 percent expansion, the Washington- based poverty-reduction agency said. Growth may reach 3.2 percent in 2011, the bank said. East Asia developing countries, which excludes Japan, Hong Kong, Taiwan, South Korea and Singapore, will expand 8.1 percent this year, faster than a November estimate of 7.8 percent, the Washington-based lender said its Global Economic Prospects report today. South Asia will grow 7 percent in 2010, it said. In East Asia, “downside risks facing the region have diminished owing to improvements in the global financial environment and positive growth developments,” the World Bank said. Capital inflows may spur the “risk of yet another round of asset bubbles, this time in emerging markets, the bursting of which could carry adverse effects over the short and medium term.” The cost of borrowing money in China’s interbank market rose on speculation China’s government will tighten curbs on loan growth. The central bank this week pushed its one-year bill yield higher at open-market auctions for a second week and last week it ordered banks to set aside more cash as reserves. To contact the reporter responsible for this story: Patrick Chu in Tokyo at pachu@bloomberg.net.

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