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Home >> Business
UPDATED: 11:45, May 01, 2007
Chinese shares close at new high despite upcoming deposit reserve ratio hike
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Chinese shares soared to a new high on Monday, the day after the central bank announced it would again raise the deposit reserve ratio for financial institutions in the hope of cooling the booming economy.

The benchmark Shanghai Composite Index surged 2.16 percent, or 81.4 points, to close at a record 3,841.27 points. The turnover reached 188.656 billion yuan (24.5 billion U.S. dollars).

The Component Index of the smaller Shenzhen Stock Exchange rose 177.33 points, or 1.66 percent, to conclude trading at a record 10,865.88 points on a turnover of 92.636 billion yuan.

Securities companies performed well. CITIC Securities rose 9.98 percent to 59.06 yuan and Beijing-based Hongyuan Securities gained by the daily allowable maximum of 10 percent to 37.05 yuan.

Shares of logistics and science and dot-coms were also in favor.

China CITIC bank, however, slumped more than 9 percent on the first trading day following its listing on the A-share market on April 27.

The central bank Monday decided to raise the deposit reserve ratio by 0.5 percentage point as of May 15 to 11 percent, the fourth time for this year and the seventh time since last year.

The hike comes after China reported surges in inflation, loans, investment, and gross domestic product in the first quarter of the year.

The move reflects the central bank's determination to tighten liquidity, a major problem threatening China's economy, said analysts.

"Raising the reserve ratio is a rather easy and flexible measure for the central bank, but it might need to raise interest rates if the nation's strong economic momentum and inflationary pressures continue in the second quarter," said Wang Xiaoguang, a researcher at the Economy Research Institute of the National Development and Research Commission, the country's top economic planner.

Source: Xinhua


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