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Tight liquidity concerns dampen index
By Feng Jianmin |
December 24, 2010, Friday
|
Print Edition
Print Edition
SHANGHAI'S benchmark stock index declined slightly as investors became increasingly concerned about tight liquidity at the end of this year.
The Shanghai Composite Index lost 0.8 percent, or 22.68 points, to 2,855.22. Turnover fell to 110.9 billion yuan (US$16.7 billion) from 127.7 billion yuan on Wednesday.
The costs of borrowing among banks have reached a three-year high. The seven-day repo rate, China's benchmark money-market rate, jumped 150 basis points to 5.67 percent, the highest level since October 2007, according to the National Interbank Funding Center.
Tight liquidity has become a concern because large banks are usually reluctant to release capital in the run up to the year end, according to the Shanghai Securities Journal.
Another factor behind banks facing tight liquidity is the raised reserve requirement ratio. Financial institutions are also expecting tighter monetary policies to be introduced.
"Investors are especially cautious ahead of the weekend and the New Year and are preparing for policies to be unveiled," said GF Securities in a note.
Car makers retreated on a remark by an official at China's top planning body that a preferential tax policy for low-emission vehicles "will almost certainly be" canceled next year. SAIC Motor Co, China's largest car producer, lost 1.6 percent to 16 yuan. Dongfeng Automobile Co fell 1.16 percent to 5.12 yuan.
The Shanghai Composite Index lost 0.8 percent, or 22.68 points, to 2,855.22. Turnover fell to 110.9 billion yuan (US$16.7 billion) from 127.7 billion yuan on Wednesday.
The costs of borrowing among banks have reached a three-year high. The seven-day repo rate, China's benchmark money-market rate, jumped 150 basis points to 5.67 percent, the highest level since October 2007, according to the National Interbank Funding Center.
Tight liquidity has become a concern because large banks are usually reluctant to release capital in the run up to the year end, according to the Shanghai Securities Journal.
Another factor behind banks facing tight liquidity is the raised reserve requirement ratio. Financial institutions are also expecting tighter monetary policies to be introduced.
"Investors are especially cautious ahead of the weekend and the New Year and are preparing for policies to be unveiled," said GF Securities in a note.
Car makers retreated on a remark by an official at China's top planning body that a preferential tax policy for low-emission vehicles "will almost certainly be" canceled next year. SAIC Motor Co, China's largest car producer, lost 1.6 percent to 16 yuan. Dongfeng Automobile Co fell 1.16 percent to 5.12 yuan.
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