Rally ends on liquidity threat
By Ding Yining and Feng Jianmin |
July 7, 2011, Thursday
|
Print Edition
Print Edition
THE Shanghai Stock Exchange closed lower for the first time in three days as fears over tight liquidity returned.
The benchmark Shanghai Composite Index was down 0.21 percent, or 5.88 points, to 2,810.48. Turnover was 122 billion yuan (US$18.9 billion).
The banking sector led the decline after foreign investors offloaded these shares. Yesterday's pullback comes after stocks rallied on Monday on calls by Chinese Vice Premier Wang Qishan for financial institutions to ease lending to small businesses.
Liquidity tightened to its highest level in more than a week on concerns that China may raise interest rate in a short term as the market expects inflation in June will rise by between 6.2 to 6.4 percent.
"Policy uncertainty is increasing in the short term and the actions of foreign investors hurt market sentiment," said Wei Haisheng, an investment consultant with GF Securities.
He said that cautious investors can buy shares of consumption-related companies and drugmakers to hedge against uncertainties.
The benchmark seven-day repurchase rate for banks rose to 7.49 percent yesterday, the highest since June 24, according to a fixed weighted average rate released by the National Interbank Funding Center shortly before noon yesterday.
Analysts said that bank payments have not caused any difficulties in the past, but the central bank's tightening measures are putting larger pressure on banks.
Banks slid after Singapore's sovereign wealth fund Temasek Holdings Pte Ltd sold US$3.62 billion worth of H-shares it owns in the Bank of China and China Construction Bank.
China Construction Bank, the country's second largest listed lender, lost 1.43 percent to 4.83 yuan. Bank of China was down 1.27 percent to 3.12 yuan.
Oil producers rose after the crude price for August delivery gained US$1.95 to US$96.89 per barrel in New York as rising demand is expected. PetroChina added 1.19 percent to 11.06 yuan.
The benchmark Shanghai Composite Index was down 0.21 percent, or 5.88 points, to 2,810.48. Turnover was 122 billion yuan (US$18.9 billion).
The banking sector led the decline after foreign investors offloaded these shares. Yesterday's pullback comes after stocks rallied on Monday on calls by Chinese Vice Premier Wang Qishan for financial institutions to ease lending to small businesses.
Liquidity tightened to its highest level in more than a week on concerns that China may raise interest rate in a short term as the market expects inflation in June will rise by between 6.2 to 6.4 percent.
"Policy uncertainty is increasing in the short term and the actions of foreign investors hurt market sentiment," said Wei Haisheng, an investment consultant with GF Securities.
He said that cautious investors can buy shares of consumption-related companies and drugmakers to hedge against uncertainties.
The benchmark seven-day repurchase rate for banks rose to 7.49 percent yesterday, the highest since June 24, according to a fixed weighted average rate released by the National Interbank Funding Center shortly before noon yesterday.
Analysts said that bank payments have not caused any difficulties in the past, but the central bank's tightening measures are putting larger pressure on banks.
Banks slid after Singapore's sovereign wealth fund Temasek Holdings Pte Ltd sold US$3.62 billion worth of H-shares it owns in the Bank of China and China Construction Bank.
China Construction Bank, the country's second largest listed lender, lost 1.43 percent to 4.83 yuan. Bank of China was down 1.27 percent to 3.12 yuan.
Oil producers rose after the crude price for August delivery gained US$1.95 to US$96.89 per barrel in New York as rising demand is expected. PetroChina added 1.19 percent to 11.06 yuan.
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