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Liquidity, housing policy concerns sent index lower
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Shanghai stocks declined three days in a row today amid growing uncertainty over liquidity and housing policy, although data showed China’s manufacturing activity may reach a seven-month high in October.
The benchmark Shanghai Composite Index shed 0.86 percent to 2,164.32 points. Turnover was 90 billion yuan (US$14.8 billion) at the trading close.
The market languished as rising money costs raised concerns that the government may tighten the monetary policy to ease inflationary pressure.
The seven-day repurchase rate, a gauge of available funds in the money market, rose 68.80 basis points to 4.68 percent today as the People’s Bank of China suspended liquidity injection for a third session.
Zhang Zhiwei, chief China economist with Nomura Holdings Inc, said in a note today that the government could have adjusted its liquidity management to offset seasonal factors that are driving the current rise in repo rates, yet it allowed the rates to rise, which is seen as a clear sign of monetary policy tightening.
Property developers were weak after Beijing announced new regulations to rein in home prices. In a statement on its website yesterday, the Beijing Commission of Housing and Urban-Rural Development said it will speed up the construction of affordable apartments and supply land to build 20,000 homes by the end of the year.
UBS Investment Research said more cities may follow its suit as home prices in 18 of the 100 cities tracked by UBS have gone up more than 10 percent since the beginning of the year.
Poly Real Estate Group Co, China’s second-largest homebuilder, declined 1.77 percent to 9.42 yuan. Gemdale Corporation fell 1.2 percent to 5.77 yuan.
Meanwhile, China’s manufacturing activity is picking up this month with the HSBC Flash China Purchasing Managers’ Index, a gauge of manufacturing activity slanted more towards private and export-oriented firms, climbing to a seven-month high of 50.9, compared with the final figure of 50.2 in September, HSBC Holdings PLC announced today.
A reading of 50 or higher indicates that activity is expanding.
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