Credit restriction sinks stock index
By Wang Yanlin |
May 5, 2010, Wednesday
|
Print Edition
Print Edition
SHANGHAI'S key stock index sank to its lowest level in seven months after losing 1.23 percent yesterday, following the central bank's request to banks to freeze more money to curb asset bubbles and prevent economic overheating.
The benchmark Shanghai Composite Index lost 35.33 points to close at 2,835.28 yesterday ¨? the first trading day after the May Day holiday. At one point it reached a high of 2,865.55 and once fell to a low of 2,809.13.
Losers outnumbered gainers 502 to 329 while 37 remained unchanged. Turnover contracted to 80.4 billion yuan (US$11.7 billion) from last Friday's 105.9 billion yuan.
The Shenzhen Component Index, which tracks the smaller domestic bourse, also shed 1.81 percent, or 201.77 points, to close at 10,960.77.
"The market is shattered by the tightening measures to cool the housing sector," said Zhang Qi, an analyst at Haitong Securities Co. "It is no surprise to see the huge loss in shares of property developers, as well as of banks and financial institutions."
The People's Bank of China, the central bank, announced on Sunday the raising of the reserve requirement ratio ¨? the share of deposits a bank must set aside as reserves ¨? by 0.5 percentage point on yuan deposits from next Monday.
This reserve requirement increase ¨? the third this year ¨? can freeze nearly another 400 billion yuan of credit.
Property developers led the decline yesterday, as the tightening credit may restrict their funding sources. Jiabao Industry and Commerce Co Ltd, Huayuan Real Estate Co Ltd, Beijing Urban Construction Co Ltd and Gree Real Estate Co Ltd all lost by the daily trading limit of 10 percent. China Vanke Co, the country's largest listed property developer, decreased 4.49 percent to 7.45 yuan.
Banks and financial institutions also dropped. The Industrial and Commercial Bank of China, the country's largest lender by market value, slipped 1.1 percent to 4.49 yuan.
China Construction Bank Corp, the second-largest, edged down by 0.76 percent to 5.21 yuan, while the Bank of Communications, partly owned by the HSBC Holdings Plc, retreated 2.11 percent to 6.97 yuan.
"The rise of the reserve ratio may reduce the expectation of an immediate interest rate increase, but the market is on guard and is hardly able to give a strong performance in the near future," said Li Jun, an analyst at Central China Securities Co.
The benchmark Shanghai Composite Index lost 35.33 points to close at 2,835.28 yesterday ¨? the first trading day after the May Day holiday. At one point it reached a high of 2,865.55 and once fell to a low of 2,809.13.
Losers outnumbered gainers 502 to 329 while 37 remained unchanged. Turnover contracted to 80.4 billion yuan (US$11.7 billion) from last Friday's 105.9 billion yuan.
The Shenzhen Component Index, which tracks the smaller domestic bourse, also shed 1.81 percent, or 201.77 points, to close at 10,960.77.
"The market is shattered by the tightening measures to cool the housing sector," said Zhang Qi, an analyst at Haitong Securities Co. "It is no surprise to see the huge loss in shares of property developers, as well as of banks and financial institutions."
The People's Bank of China, the central bank, announced on Sunday the raising of the reserve requirement ratio ¨? the share of deposits a bank must set aside as reserves ¨? by 0.5 percentage point on yuan deposits from next Monday.
This reserve requirement increase ¨? the third this year ¨? can freeze nearly another 400 billion yuan of credit.
Property developers led the decline yesterday, as the tightening credit may restrict their funding sources. Jiabao Industry and Commerce Co Ltd, Huayuan Real Estate Co Ltd, Beijing Urban Construction Co Ltd and Gree Real Estate Co Ltd all lost by the daily trading limit of 10 percent. China Vanke Co, the country's largest listed property developer, decreased 4.49 percent to 7.45 yuan.
Banks and financial institutions also dropped. The Industrial and Commercial Bank of China, the country's largest lender by market value, slipped 1.1 percent to 4.49 yuan.
China Construction Bank Corp, the second-largest, edged down by 0.76 percent to 5.21 yuan, while the Bank of Communications, partly owned by the HSBC Holdings Plc, retreated 2.11 percent to 6.97 yuan.
"The rise of the reserve ratio may reduce the expectation of an immediate interest rate increase, but the market is on guard and is hardly able to give a strong performance in the near future," said Li Jun, an analyst at Central China Securities Co.
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