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March 15, 2010

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Losses likely to be extended

SHANGHAI stocks are likely to extend their losses this week as investors are seen to sit on the sidelines on speculation an interest rate increase is around the corner, analysts said.

The benchmark Shanghai Composite Index plunged 1.24 percent last Friday to end at 3,013.41 last week, paring a weekly gain, on rumors the central government was set to raise the rate over the weekend.

The speculation arose after the National Bureau of Statistics said last Thursday that China's consumer prices rose 2.7 percent in February, faster than expectations. China has set a 3 percent inflation target this year.

The market seems oblivious to positive news but sensitive to rumors such as a rise in the interest rate, indicating investors need an excuse to exit the market,said Qian Qimin, an analyst at Shenyin & Wanguo Securities Co.

Qian forecast it is more likely the barometer will keep on the downward track with lackluster trade expected.

Teng Yin, an Everbright Securities Co analyst, held similar views.

The expectations over a tightening of the monetary policy are growing. More measures are seen to be taken to rein in market liquidity and avert an asset bubble, said Teng.

He added that investing in some sectors involved in new financial tools, including margin trading and stock futures, may be good.


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