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July 11, 2011

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Key index may remain at current level

SHANGHAI'S stock market may continue to consolidate around the current level as investors wait to see if the central government will stick on to its monetary tightening measures.

The Shanghai Composite Index, which had lost 1.6 percent in the first half of the year, gained 1.4 percent last week to end at 2,797.77 on Friday. The index has fallen 0.4 percent year to date.

Shenyin Wanguo Securities said the index may hover around 2,800 in the short term because any rise would be curbed by concerns over possible further monetary tightening and the mounting local government debt.

"Chances are slim for a sharp gain or a sharp fall in the stock index this week as the economic data, largely expected, had been reflected in the market last week," according to Qin Xiaobin, a strategist at Galaxy Securities. "Still, over a longer time-frame, we see more upward possibility in the market," he said.

On Saturday China said its June inflation rate grew at the fastest pace in three years at 6.4 percent. While some analysts said this may have peaked, others say inflation pressure remains strong and the government may raise interest rates again within the year, which could damp corporate profits and growth.

To rein in inflation and liquidity, the People's Bank of China has raised interests rates five times, most recently last week, since October.

The trade data released yesterday showed China's imports rose at the slowest pace in June since November 2009 as the impact of monetary tightening took its toll on the economy.




 

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