Chinese investors hold back as market may fall

08:31, January 24, 2011      

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Chinese mainland's stock market will continue to fall amid liquidity pressure and speculation on further tightening measures including another interest rate hike, analysts said.

The benchmark Shanghai Composite Index fell 2.7 percent last week, the largest weekly loss in two months, to 2,715.29.

"Market investors are increasingly willing to sit on the sidelines amid growing caution over tighter market liquidity and more stringent policies (on lending)," said Yi Xiaobin, an analyst at Galaxy Securities. "In addition, an increasing number of companies fell below their public offering price on their debut, further dampening investor confidence."

Last Tuesday, all five new listings fell below their offering prices, indicating weak market sentiment.

Last Thursday, the key gauge fell 2.92 percent to below 2,700 points.

"Still-strong economic growth will give those in the government in favour of further monetary tightening actions greater reason to act," said Alaistair Chan, an economist at Moody's Analytics.

Qian Qimin, an analyst at Shenyin Wanguo Securities, said "The recent freezing weather along with the -upcoming Spring Festival may push up the CPI in January, fanning speculations China will raise the reserve requirement ratio or increase interest rates around the holiday."

Source: Shanghai Daily
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