Fund sell-offs set to depress stocks
By Pan Xiaoyi |
January 25, 2010, Monday
|
Print Edition
Print Edition
SHANGHAI stock market is likely to remain sluggish this week as institutional investors need to sell shares to pay year-end dividends, analysts said.
The benchmark Shanghai Composite Index posted a weekly loss of 3 percent to end at 3,128.59 points last Friday amid fears of more measures to curb possible inflation, such as an interest rate rise.
"Blue chips and heavyweights have been the main force in dragging down the market as fund managers have to sell shares to pay dividends. Meanwhile, new shares keep floating on the markets," said Bian Fengwei, an analyst from Guodu Securities Co.
Teng Yin from Everbright Securities Co agreed with this. "The benchmark index may extend its losses due to the imbalance between supply and demand," said Teng.
Teng also said the growing expectation of tighter monetary policy will influence the share market.
"Speculation about a lift in the interest rate is strengthening after strong economic growth of 10.7 percent in the fourth quarter while the Consumer Price Index rose to a 13-month high of 1.9 percent in December, indicating a return of inflation risk," said Teng.
The People's Bank of China has surprised the market by raising the reserve ratio, the amount of money a bank must deposit with the central bank, by 0.5 percentage points this month, earlier than market expectation. Raising interest rates is usually the next step in cooling the market.
The benchmark Shanghai Composite Index posted a weekly loss of 3 percent to end at 3,128.59 points last Friday amid fears of more measures to curb possible inflation, such as an interest rate rise.
"Blue chips and heavyweights have been the main force in dragging down the market as fund managers have to sell shares to pay dividends. Meanwhile, new shares keep floating on the markets," said Bian Fengwei, an analyst from Guodu Securities Co.
Teng Yin from Everbright Securities Co agreed with this. "The benchmark index may extend its losses due to the imbalance between supply and demand," said Teng.
Teng also said the growing expectation of tighter monetary policy will influence the share market.
"Speculation about a lift in the interest rate is strengthening after strong economic growth of 10.7 percent in the fourth quarter while the Consumer Price Index rose to a 13-month high of 1.9 percent in December, indicating a return of inflation risk," said Teng.
The People's Bank of China has surprised the market by raising the reserve ratio, the amount of money a bank must deposit with the central bank, by 0.5 percentage points this month, earlier than market expectation. Raising interest rates is usually the next step in cooling the market.
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