SHANGHAI'S key stock index dropped in morning trade as the market continued to consolidate amid tight liquidity.

The Shanghai Composite Index shed 0.58 percent to 2,338.12 points. Turnover shrunk to 37.5 billion yuan (US$6 billion).

The consumer price index for January, which rose 4.5 percent from a year earlier compared with 4.1 percent in December, exceeded the market estimate, making it less likely for the central bank to announce another bank reserve requirement ratio cut in the foreseeable future, analysts said.

Financials led the retreat. Industrial and Commercial Bank of China, the country's biggest lender, fell 0.69 percent to 4.34 yuan. China Construction Bank dropped 0.82 percent to 4.82 yuan.

"Though the bank's profit growth is above 16 percent, their endogenous capital is still not enough to help them sustain capital adequacy," Li Yamin, analyst at UBS Securities said, who estimated the banking industry will have to raise 500 billion yuan through refinancing from 2012 to 2013.

The hotel industry rose the most across the board on Valentine's Day. Dong Fang Hotel jumped by the daily 10 percent limit to 7.43 yuan. Shenzhen Century Plaza Hotel gained 6.17 percent to 4.3 yuan.