Shanghai index dives almost 8%
Tuesday, June 10th, 2008Chinese stocks reacted negatively to a Chinese Central Bank’s credit-tightening move. The benchmark Shanghai Composite Index fell 7.7% or 257.34 points. Financial markets in the country were closed yesterday due to a national holiday. The measure by the central bank leaves less funds available for lending and investments. The Chinese economy has been growing at an annual rate of about 10% over the last few years. The government has introduced several measures to prevent the economy from overheating.
Chinese stocks plunged Tuesday following the central bank’s latest credit-tightening move.
The benchmark Shanghai Composite Index dropped 257.34 points, or 7.7 percent to 3,072.33. The Shenzhen Composite Index of China’s second, smaller market lost 8 percent to 928.20.
Chinese financial markets were closed Monday for a national holiday, so Tuesday was the earliest chance for investors to react to a weekend decision by the central bank ordering banks to keep more deposits on hand.
“It’s the second time in a month that the reserve-requirement ratio was raised and this deeply worries investors. The market is too weak to resist any bad news,” said Wei Daoke, an analyst with Shenyin Wanguo Securities in Shanghai.
The move, which leaves less money available for lending and investment, signaled authorities’ intentions to keep credit tight to fight inflation, likely hurting prospects for financial and real estate companies, among others.