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Record withdrawal of liquidity by central bank hammers index
By Ye Zhen |
February 22, 2013, Friday
|
Print Edition
Print Edition
SHANGHAI stocks tumbled yesterday, with the key index suffering its biggest loss in nearly 16 months, after China's central bank drained a record amount of liquidity this week and the central government urged continued home-purchase curbs.
The Shanghai Composite Index slumped 3 percent, the biggest fall since November 2011, to close at 2,325.95 points. The index has fallen 4.4 percent since the market reopened after the week-long Spring Festival holiday.
The People's Bank of China yesterday drained 10 billion yuan (US$1.6 billion) from the money market via 91-day repurchase agreements and another 10 billion yuan through 28-day repos, bringing the net withdrawal to 910 billion yuan this week, the highest weekly amount ever.
The PBOC on Tuesday launched a 28-day repurchase operation to take 30 billion yuan out, the first withdrawal in eight months, fuelling concern that the government may start to tighten monetary policy.
A UBS report yesterday said the "government may start to tighten policy as early as April as the economy recovers and consumer prices and home prices rise while concerns about excessive investment and financial risk emerge."
Property developers felt the weight after the State Council on Wednesday urged cities where home prices rose to impose property curbs. It also reiterated its intention to expand a pilot property tax to more cities.
Poly Real Estate, China's second-largest listed developer, shed 0.7 percent to 12.30 yuan. Gemdale Corp lost 0.8 percent to 7.06 yuan.
Commodity stocks also fell after prices plunged overnight with oil losing over US$2 per barrel, gold reaching a 7-month low, and platinum, palladium and silver slipping over 3 percent.
Jiangxi Copper Co dived 6 percent to 24.32 yuan. Shandong Gold Mining Co lost 4.4 percent to end at 34.86 yuan.
The Shanghai Composite Index slumped 3 percent, the biggest fall since November 2011, to close at 2,325.95 points. The index has fallen 4.4 percent since the market reopened after the week-long Spring Festival holiday.
The People's Bank of China yesterday drained 10 billion yuan (US$1.6 billion) from the money market via 91-day repurchase agreements and another 10 billion yuan through 28-day repos, bringing the net withdrawal to 910 billion yuan this week, the highest weekly amount ever.
The PBOC on Tuesday launched a 28-day repurchase operation to take 30 billion yuan out, the first withdrawal in eight months, fuelling concern that the government may start to tighten monetary policy.
A UBS report yesterday said the "government may start to tighten policy as early as April as the economy recovers and consumer prices and home prices rise while concerns about excessive investment and financial risk emerge."
Property developers felt the weight after the State Council on Wednesday urged cities where home prices rose to impose property curbs. It also reiterated its intention to expand a pilot property tax to more cities.
Poly Real Estate, China's second-largest listed developer, shed 0.7 percent to 12.30 yuan. Gemdale Corp lost 0.8 percent to 7.06 yuan.
Commodity stocks also fell after prices plunged overnight with oil losing over US$2 per barrel, gold reaching a 7-month low, and platinum, palladium and silver slipping over 3 percent.
Jiangxi Copper Co dived 6 percent to 24.32 yuan. Shandong Gold Mining Co lost 4.4 percent to end at 34.86 yuan.
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