| Stocks keep sliding on interest rate concern |
SHANGHAI, July 4 -- CHINESE mainland's stocks fell after the central bank signaled it may raise interest rates and account openings at brokerages grew at the slowest pace since March, suggesting the flow of savings into equities will diminish, Bloomberg said today. Shanghai Pudong Development Bank Co led the decline.
The Shanghai Composite Index, which tracks the bigger of mainland's stock exchanges, fell 2.1 percent to 3,816.17. The Shenzhen Composite Index, which covers the smaller one, lost 2.1 percent to 1,078.95.
Pudong Bank, the Chinese partner of Citigroup Inc, fell 1.61 yuan (23 US cents), or 4.5 percent, to 34.28 yuan. China Minsheng Banking Corp, the nation's only privately controlled lender, slipped 0.34 yuan, or 2.9 percent, to 11.40 yuan.
The People's Bank of China said yesterday it will ``moderately'' tighten monetary policy to limit lending and investment. Policy makers have raised interest rates twice this year and ordered banks to set aside more money as reserves five times amid concern excess liquidity will lead to asset bubbles, overcapacity and idle factories.
A further increase in interest rates would boost returns on bank savings and may stem the flow of funds into equities. Household yuan deposits fell by 278.4 billion yuan in May as a rallying stock market led to some 300,000 new brokerage accounts being opened daily.
Aluminum Corp of China Ltd, the nation's biggest maker of the lightweight metal, also called Chalco, dropped 1.76 yuan, or 7.4 percent, to 22.18 yuan. Daqin Railway Co, the operator of China's biggest coal transport network, fell 0.58 yuan, or 3.7 percent, to 14.97 yuan.
Equities also fell on concern local investors will switch to shares outside the mainland, which are cheaper in valuation.
China's securities regulator said June 20 it will let the nation's brokerages and fund management companies put money into equities, government and corporate bonds outside the mainland under the so-called qualified domestic institutional investor, or QDII, program starting July 5.
Industrial & Commercial Bank of China Ltd, the nation's biggest lender, raised 4.45 billion yuan for the country's largest QDII fund so far, said the lender on July 2. The fund will invest half of its assets in China-related stocks in Hong Kong and the other half in high-yield bonds and money-market products across Asia, it said.
Local investors are expected to buy a combined US$95 billion of overseas securities by the end of 2009, according to Z-Ben Advisors Ltd, which provides research on China's investment management industry.
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