China Interbank Rate Rises; Shanghai Stocks Fall

Mayank Mehta
07 Jan, 2010
New York City

China raised its interbank rate for the first time in five months. The increase was slight, but signaled China

[R]8:30 PM Hong Kong, China – China raised its interbank rate for the first time in five months. The increase was slight, but signaled China’s willingness to tighten the monetary policy as the economic expansion is likely to be more than 9%. In Shanghai trading automakers led the decliners and in Hong Kong banks and resource stocks fell.[/R]

The People’s Bank of China offered yields for its three-month bill at 1.3684% from 1.328%. A slight increase of less than 0.05% is viewed by most economists as more and larger rate increases in the future.

The People’s Bank of China sold Rmb60 billion or $8.8 billion of three month bills at 1.3684%. The yields increased by a small percentage but market took this as a signal of higher rates in the future and monetary policy tightening.

Stocks in Shanghai and Hong Kong declined after the rate increase despite air and ocean transporters reporting near full bookings for shipments in December.

Hang Seng index in Hong Kong decreased 147.22 or 0.66% to 22,269.45, and CSI 300 index in China lower 70.27 or 1.98% to 3,471.46.

Auto sales growth this year is expected to decline to 15% from the robust 42% increase in 2009 on a government stimulus. The expected decline in sales growth and rate increased dragged automakers lower in Shanghai trading.

Hong Kong Movers

Cheung Kong (Holdings) Limited added 0.3% to HK$101.80 after the investment and project management company said Hong Kong’s wealthiest investor Li Ka-shing raised his stake in the company to 41.50% from 41.47% in three separate transactions within one week.

Hong Kong Exchanges and Clearing Limited added 2.3% to HK$150.50 on a growing speculation that trading volume will rise in the year and more Chinese companies will seek listing on the exchange.

Hutchison Whampoa Limited an investment company fell 0.1% to HK$56.40 and Li Ka-shing raised his investment holdings in the company 12 times in December last year.

Shanghai Movers

Stocks in Shanghai declined sharply on the worries that the government will curb lending for property purchase and after China increased interbank lending rate at a bond offering, first increase in five months.

Automakers led the decliners followed by losses in banks and resource stocks.

SAIC Motor Co declined 4.4% to Rmb24.12, FAW Car Co declined 4.1% to Rmb 22.94 and Chongqing Changan Automobile Co dropped 4.9% to Rmb13.50.

China Minsheng Banking Corp declined 2.7% to Rmb7.70 and ICBC dropped 2.4% to Rmb5.21.