Stocks News
- Market's rebound seen but banks may be hit
Date: 10-Dec-2007 Sources: (Xinhua Online)
BEIJING, Dec. 10 -- Bank stocks may suffer the impact of higher reserve ratio requirement when the Shanghai stock market trades today, but most analysts expect the market to continue to rebound this week after the key index jumped above the key 5,000 points last week.
The People's Bank of China announced on Saturday an increase in the ratio - the amount of money banks must hold in reserve - by one percentage point from December 25 to rein in lending. Shares of banks, as well as property developers, which are most vulnerable to the move, may fall.
'Lenders with higher loan-to-deposit ratio such as China Merchants Bank could be hit harder than their larger rivals like ICBC,' said a banking analyst.
This is the 10th increase this year and the rise is twice that of the previous nine. A higher reserve ratio requirement has been widely expected, given the nation's rapid economic growth and rising inflation, especially after top policy makers said last week it was shifting its monetary policy from 'prudent' to 'tight.'
The market has well digested most of the previous rises so far. The Shanghai Composite Index had gained in the first trading session following each reserve-ratio rise announcement except on two occasions in September and last month.
'But as we typically saw a 0.5-percentage-point rise this year, the latest full one-percentage point increase is bit surprising and that may cause more negative influences on the market,' said Xu Yinghui, an analyst at Guotai Jun'an Securities.
The benchmark Shanghai index rose 4.52 percent last week to close at 5,091.76, after suffering an 18.19-percent loss in November, the largest monthly drop in 13 years. In mid-October, the index had peaked at 6,092.06.
'Stock markets in the west and Hong Kong may rise on speculation the U.S. Fed Reserve may cut interest rate this week,' a Shenyin Wanguo Securities analyst said. 'This provides a good support for the A-share market to keep rising. And new fund sales could also allow better liquidity.'
Shenyin Wanguo forecasts the index may move between 4,950 points and 5,350 points this week. Everbright Securities gives a range of 5,000 to 5,200 while Galaxy Securities forecasts it at between 5,000 and 5,200.
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