China Forex Reserve and Inflation Up

123jump.com Staff
14 Apr, 2008
New York City

China''s foreign currency reserves jumped to $1.68 trillion at the end of the first quarter, 40% rise from a year ago. The sharp rise in foreign reserves is fueling inflation and attracting speculative capital to China. Investors have to come to believe that China will have to strengthen its currency against dollar and increase interest rate to slow down economic expansion. In Hong Kong trading the Hang Seng Index fell 3.47% or 856.59 at 23,811.20.

[R]6:00AM New York, 6:00PM Tokyo - China’s foreign exchange reserves reached a record high of $1.68 trillion in March.[/R]

Hong Kong stock averages dropped on rising speculation that the government might introduce further tightening measures on the back of preliminary strong economic data.

Market sentiment

In Hong Kong trading the Hang Seng Index fell 3.47% or 856.59 at 23,811.20, and the China Enterprises Index of Hong Kong-listed companies, or H shares, slumped 5.19% or 692.91 to 12,664.21.

In Shanghai trading, CSI 300 fell 6.54% or 247.40 to 3,536.33.

Daily turnover on main-board was HK$74.8 billion compared to HK$77.14 billion on Friday.

China’s forex reserves climb to 1.68 trillion in March

The People’s Bank of China reported on Friday last week that the country’s foreign exchange reserves increased by $153.9 billion from the end of last year to $1.68 trillion by the end of March, reflecting a 40% increase from a year ago.

Economists estimates that increasing foreign currency reserves and declining trade surplus show that speculative capital is flowing in the country on a large scale.

Separately, the central bank said the growth of China’s broad measure of money supply, or M2, which includes cash and all types of deposits, slowed to an annual 16.3% in March from 17.5% in February.

China’s March consumer price index jumps 8.3% in March

People’s Daily Online reported today that deputy governor of the People''s Bank of China Liu Shiyu said in Shanghai over the weekend that March consumer price index advanced by 8.3%, and in the first quarter inflation at 8%.

The figures were based on the central bank’s preliminary internal research. However, the National Bureau of Statistics will release its inflation on Thursday.

Gainers and Losers

Financial stocks fell in today’s trade after preliminary data, which showed that the consumer price index jumped 8.3% in March, stoked expectations that the authorities will further tighten measures in order to prevent the economy from overheating.

The Industrial and Commercial Bank of China fell 5.9%, China Life declined 5.8% and China Construction Bank fell to HK$6.32 after it announced that it will issue up to Rmb 40 billion in subordinated bonds with maturity of less than 10 years.

Other large cap stocks fell as well on reports by the South China Morning Post that companies including China Mobile, CNOOC, Lenovo and China Netcom are likely to be allowed to list A shares in Shanghai this year.

China Netcom plunged 4.6%, China Mobile edged down 3.7%, CNOOC slipped 4.8% and Lenovo declined 2.6%.

Sino Union Petroleum Chemical International rose 8.1% to HK$1.61 after it announced plans to form a venture with Yanchang Petroleum with an investment of $300 million to explore oil and gas in international territories.