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December 13, 2010

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Economic data likely to lift key index this week

THE Shanghai stock market is likely to pick up slightly this week on better economic data released at the weekend, analysts said yesterday.

The Shanghai Composite Index was generally flat and trading was sluggish last week because investors were cautious ahead of the unveiling of the consumer price index for November over the weekend and also over China's annual Central Economic Work Conference, the top economic planning meeting.

"Since the industrial output, fixed asset investment and trade figures have shown sustainable growth, investor sentiment is expected to be boosted," said Zhang Gang, an analyst at Southwest Securities Co.

However, the consumer price index, a general gauge of inflation, surged to 28-month high of 5.1 percent, leading to speculation that more measures, such as another interest rate hike, are in the pipeline to battle price rises.

"There is not much possibility for a quick rebound, considering the concerns over another interest rate hike," said Teng Yin, an analyst at Everbright Securities Co.

Last Friday, the People's Bank of China, the central bank, raised the reserve requirement ratio for banks by 0.5 percentage point - the third time in five weeks - which is expected to freeze an additional 360 billion yuan (US$54 billion).

"As the central bank raised the reserve ratio instead of interest rate, concerns over a rate hike still exist," said Teng.




 

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