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Tighter liquidity triggers market's sliding

SHANGHAI'S market plunged more than 2 percent in the morning session with banking sectors retreating after the central bank lifted reserve ratio, spurring fear of a tightening liquidity.

The benchmark Shanghai Composite Index lost 2.32 percent, or 75.96 points, to close at 3,198.01 points. Turnover was 110 billion yuan (US$16.1 billion). Losers outnumbered gainers 624 to 254, and 36 remained unchanged.

The Shenzhen Composite Index, which tracks the smaller domestic market, dropped 1.12 percent to close at 1,199.51 points.

The People's Bank of China said yesterday it will raise the reserve ratio, the amount of money a bank must deposit with the central bank, by 0.5 percentage points to 16 percent, starting from next Monday. Analysts and economists said this may signal a pending interest rate lift as well as a pull out of overly loose monetary policy to curb surging property prices.

The PBOC yesterday also raised the returns on its 20-billion-yuan central bank one-year bills to 1.8434 percent, the first lift since August.

Shanghai Pudong Development Bank lost 3.89 percent to 19.99 yuan. China Construction Bank retreated 3.24 percent to close at 6 yuan. Bank of Communications buckled 3.40 percent to 8.80 yuan.

Property developers showed mixed results. China Vanke Co, the biggest listed domestic real estate developer, lost 2.72 percent to 10.01 yuan. Gemdale Corporation was down 2.24 percent to 13.07 yuan. Shanghai Lujiazui Finance & Trade Zone Development Co Ltd dropped 2.18 percent to 24.26 yuan.

Brokerages were also flat. Sinolink Securities dropped 2.98 percent to 23.45 yuan and Haitong Securities buckled 4.02 percent to 18.38 yuan. Guoyuan Securities retreated 3.37 percent to 20.95 yuan. Changjiang Securities fell 4.04 percent to 19.47 yuan.


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