March 20th, 2011
Econintersect: The Shanghai Daily is speculating that uncertainty about the economic impact of the Japanese earthquake and tsunami will weigh heavily on Chinese stocks this week. This will combine with tightened liquidity to make investors hold back. However, not all analysts are downbeat. From the Shanghai Daily: Follow up:
The People's Bank of China last week reported that M2, the broadest measure of money supply, fell nearly 10 percent in February from a year earlier, while new loans in February were 192.9 billion yuan less than last year.
The central bank last Friday said it would raise the bank reserve requirement ratio by 0.5 percentage point to freeze liquidity from the financial system. A total of 360 billion yuan (US$54.8 billion) of capital may be frozen from lending from Friday, when the increase takes effect.
But investors were still worried about Japan's economic recovery from the disasters despite the Bank of Japan having injected a total of 34 trillion yen (US$420 billion) into the market to buy assets and equities last week.
The Shanghai's stock index may slightly increase after the panic over the damage and radiation caused by the earthquake eases, said Zeng Xianzhao, an analyst at Everbright Securities. He is less worried about the hike in the reserve ratio but he said that caution among investors and tighter liquidity will still weigh on market sentiment.
"The market in March may be weaker because there's going to be less money around," Zeng said.
Source: Shanghai Daily