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Weekend RRR may give mainland stocks room to grow

By Wang Jiamei (Global Times)

08:19, May 14, 2012

The long-awaited cut in the reserve requirement ratio (RRR) the central bank announced over the weekend may give a boost to the Chinese mainland stock markets today, but worries about lackluster macroeconomic data and the political overseas will still cast a shadow over the A-share market, analysts have said.

The benchmark Shanghai Composite Index ended trading at 2,394.98 points last week, down 2.33 percent week-on-week; while the Shenzhen Component Index closed at 10,211.41 points, down 3.43 percent compared with the previous week, snapping a five-week winning streak.

Last week, the Shanghai Composite suffered four days of losses to fall below the important 2,400-point mark, erasing gains recorded in the previous week, as concerns over the domestic economic outlook conquered the upbeat policy moves made by market regulators.

The latest release of April's economic data shows that the country's macro economy turned out to be weaker than expected last month.

The General Administration of Customs reported that China's exports in April increased 4.9 percent year-on-year to $163.25 billion, lower than the expected 8.5 percent; while imports only rose 0.3 percent to $144.83 billion.

The Consumer Price Index (CPI) grew 3.4 percent last month from a year earlier, according to the National Bureau of Statistics, slightly higher than the predicted 3.3 percent.

Meanwhile, the A-share market also took a hit from uncertainties in the European markets following elections in France and Greece.

Most investors displayed prudence last week in the absence of positive news which might have lifted the market. Both the Shanghai and Shenzhen markets saw trading volume sink continuously throughout the week, with the combined turnover down to 147.05 billion yuan ($23.23 billion) Friday, a considerable drop of 26.26 percent compared to Monday.

Moreover, the A-share market registered 19.9 billion yuan of capital outflows last week, up remarkably from the previous week's 3.44 billion yuan.

The nonferrous, property and securities sectors shed the most capital; while only the electricity sector recorded a weekly capital inflow, of 66 million yuan, due to news that the pricing department is working on a new electricity pricing system for household users.

Regarding the coming week, a temporary rebound is expected after the People's Bank of China announced Saturday an RRR cut of 0.5 percentage point for commercial banks, effective May 18, which is estimated to free about 420 billion yuan for lending.


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