Uneasy about tightening, China stocks dive

15:28, March 15, 2010      

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China's stock markets in Shanghai and Shenzhen sank on Monday, as investors remained worried about uncertainties in Beijing's financial policy, and continuous weakness in overseas markets including the Wall Street.

The Shanghai composite stock index declined 36.47 points at the closing, or 1.21 percent, while the Shenzhen stock index dived by 265.78 points, or 2.18 percent. Trading was very light, as the two markets witnessed transaction volume of only 134 billion yuan.

After China's official statistics reported last week an unexpected jump of 2.7 percent inflation rate for February, investors have been nervous in anticipating further credit tightening measures from the central bank, the People's Bank of China.

Governor Zhou Xiaochuan was quoted by the China Securities Journal on Monday that the bank's Monetary Policy Committee which he heads was "a little bit surprised" by the "higher than expected" rise in February inflation rate. Before the National Bureau of Statistics disclosed a 2.7 percent jump in inflation, most market analysts estimated the rise at 2.1-2.4 percent.

Zhou's remarks could be taken as more tightening measures will be taken by the central bank to rein in credit and manage "inflation expectation", a chief job for Beijing policy-makers this year. Earlier, China's Premier Wen Jiabao outlined in his government work report to the National People's Congress, which closed on Sunday in Beijing that China will try to curb annual inflation within 3 percent for 2010.

Some market watchers have expected another 0.5 percentage hike in the commercial banks' reserve requirement ratio by the central bank, which is now set at 16 percent. There are also heavier worries that the central bank could raise the benchmark interest rates late this month or early next month.

And, investors found few reasons to buy after U.S. economic data released Friday painted an uneven picture of recovery in the world's largest economy. While retail sales were better than expected last month, a weaker report on consumer sentiment disappointed traders.

Investors were also awaiting statements and policy decisions from central banks in the U.S. and Japan expected later this week.

In Japan, the Nikkei 225 stock average lost 19.26 points, or 0.2 percent, to 10,732.00.

People's Daily Online

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