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Shanghai shares drop after interest rate hike
By Lydia Chen |
December 27, 2010, Monday
|
Online Edition
Online Edition
STOCKS in Shanghai ended lower for a fourth day today, with trading being most active in the real estate sector where investors dumped shares over a latest interest rate hike.
The Shanghai Composite Index slipped 1.90 percent, or 53.76 points, to 2,781.40. Turnover climbed to 123.39 billion yuan (US$18.61 billion) from 95.89 billion yuan on Friday.
The People's Bank of China announced on Saturday a rise in its benchmark one-year lending rate by 25 basis points to 5.81 percent, and the one-year deposit rate the same amount to 2.75 percent.
This was the second rate rise within two months as the government ratchets up to deploy more monetary weapons to tame stubbornly rising inflation that hit 5.1 percent in November, the highest in 28 months.
The market responded to the news with an advance of up to 1.5 percent in the morning session. However, shares started to slump in the afternoon on concerns that a tightening monetary policy may slow growth of the world's second largest economy.
Aluminum Corp. of China Ltd, the nation's biggest producer of aluminum, shed 2.33 percent to 10.07 yuan while Zhuzhou Smelter Group Co., the largest producer of zinc, slid more than 4.66 percent to 17.18 yuan. Kweichow Moutai Co. and GD Midea Holding Co. both dropped more than 3 percent.
Developers were among the worst hit because they had to pay a higher cost to borrow money from banks while home buyers also face a more expensive mortgage.
China Vanke Co, the country's largest developer, lost 2.89 percent to 8.75 yuan. Shanghai Lujiazui Finance & Trade Zone Development Co tumbled 4.32 percent to 17.07 yuan.
The Shanghai Composite Index slipped 1.90 percent, or 53.76 points, to 2,781.40. Turnover climbed to 123.39 billion yuan (US$18.61 billion) from 95.89 billion yuan on Friday.
The People's Bank of China announced on Saturday a rise in its benchmark one-year lending rate by 25 basis points to 5.81 percent, and the one-year deposit rate the same amount to 2.75 percent.
This was the second rate rise within two months as the government ratchets up to deploy more monetary weapons to tame stubbornly rising inflation that hit 5.1 percent in November, the highest in 28 months.
The market responded to the news with an advance of up to 1.5 percent in the morning session. However, shares started to slump in the afternoon on concerns that a tightening monetary policy may slow growth of the world's second largest economy.
Aluminum Corp. of China Ltd, the nation's biggest producer of aluminum, shed 2.33 percent to 10.07 yuan while Zhuzhou Smelter Group Co., the largest producer of zinc, slid more than 4.66 percent to 17.18 yuan. Kweichow Moutai Co. and GD Midea Holding Co. both dropped more than 3 percent.
Developers were among the worst hit because they had to pay a higher cost to borrow money from banks while home buyers also face a more expensive mortgage.
China Vanke Co, the country's largest developer, lost 2.89 percent to 8.75 yuan. Shanghai Lujiazui Finance & Trade Zone Development Co tumbled 4.32 percent to 17.07 yuan.
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