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November 23, 2010

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Shares dip on banks' reserve ratio hike

SHANGHAI'S key stock index dipped as blue chips declined after China told banks to put aside more money from lending last Friday.

The benchmark Shanghai Composite Index edged down 0.15 percent, or 4.2 points, to close at 2,884.4 points. Turnover rose to 165.3 billion yuan (US$24.9 billion) from last Friday's 155.8 billion yuan.

The central bank announced last Friday that reserve requirement ratio for banks will be raised 0.5 percentage points, the second hike in a month.

Analysts expect China to raise interest rates by the end of this year.

"The market is still waiting for news on the interest rates," said Li Taiyong, an analyst with GF Securities. "Uncertainties on policy outlook will last at least until November's Consumer Price Index is released. The country's administrators need time to see whether their controlling measures have taken effect."

Banks led the decliners. The Bank of China lost 1.2 percent to 3.28 yuan. China Construction Bank fell 2.3 percent to 4.67 yuan. China Merchants Bank slipped 2.3 percent to 13.25 yuan.

"Small and medium caps are more likely to gain against uncertainties on the blue chips," said Wang Zhen, an analyst with Guotai Junan Securities.

"Firms in theses sectors enjoy better policy support from the country."




 

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