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Stocks end lower over monetary policy concerns
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Shanghai shares ended lower today amid concern that China may shift to embrace a tighter monetary policy amid increasing capital inflows and rising inflationary pressure.
The key Shanghai Composite Index fell 0.83 percent, or 18.59 points, to 2,210.65. Shares worth of 135 billion (US$22.1 billion) changed hands.
The latest data from the People’s Bank of China, China’s central bank, showed that China's yuan funds outstanding for foreign exchange rose for a second month in September, 126.4 billion yuan more than in August, a sign of increasing capital inflow into the world’s second-largest economy.
Concern intensified today that China might tighten monetary policy. The central bank continued to suspend weekly auctions of reverse repurchase agreements, which have been its major tools to provide liquidity in recent months.
The PBOC last week suspended its regular reverse repurchase operations and stopped liquidity injection for the first time since July. The suspension resulted in a net liquidity withdrawal of 44.5 billion yuan from the money market last week, the biggest since March.
“We believe monetary policy is likely to be tightened in the fourth quarter as growth is on track to achieving the 7.5 percent target and inflation was stronger than expected at 3.1 percent year on year in September,” Zhang Zhiwei, chief China economist with Nomura Holdings, said in a recent report.
Media firms dragged the market down. Bestv New Media Co, which has a joint venture with Microsoft in Shanghai’s free trade zone, fell by the daily limit of 10 percent to 39.69 yuan after surging 6.4 percent yesterday. Shanghai Xinhua Media Co slumped 5.8 percent to 10.48 yuan after surging more than 50 percent in three weeks following news about an imminent merger between its shareholder Jiefang Daily Group and Wenhui-Xinmin United Press Group.
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