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China tightening Credit, Chinese stocks fall big overnight -2.9% fall for second straight day.

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August 28, 2009 – Comments (1)

 

Worries about tighter government policies sent China's markets lower for a second day. Major European bourses opened higher.

Trade across Asia was quiet, with many investors out for summer holidays or waiting for more clues about the strength of recovery in the global economy following the worst downturn in decades. Oil prices rose moderately, as did the dollar against the yen.

Investors were hopeful about prospects for Asian exports after a U.S. government report showed the economy shrank at a 1 percent annualized rate in the second quarter. While unchanged from a preliminary reading on gross domestic product, the updated figure was better than the expected 1.5 percent decline and added to evidence the world's largest economy was turning around.

However, gains were capped by fears about China's measures to prevent the economy from overheating after loose banking policies and frenetic stimulus spending unleashed enormous liquidity that's helped lift regional markets since March.

"Investors are still worried about the policies in China," said Marcus Au, a market analyst at Tanrich Financial in Hong Kong. "After helping the markets for months the China story is now starting to weigh on sentiment."

In early European trade, France's CAC 40 was up 0.8 percent, Germany's DAX advanced 0.9 percent and Britain's FTSE 100 rose 0.6 percent.

In Asia, Japan's Nikkei 225 stock average rose 60.17, or 0.6 percent, to 10,534.14 despite news that Japan's unemployment rate rose to an all-time high in July and prices fell at a record pace - both threatening to dull the economy's recovery.

In China, the Shanghai benchmark dove 2.9 percent to 2,860.69, and Hong Kong's Hang Seng was off 0.7 percent at 20,098.62.

Korea's Kospi was up 0.5 percent, India's Senses fell 0.4 percent

1 Comments – Post Your Own

#1) On August 28, 2009 at 10:52 AM, hhasia (65.87) wrote:

The assumption that China is tightening credit is missleading. In fact the unprecidented lending without proper increases for capital requirements is a recipe for risk. The Chinese, being prudent money managers, are simply counter ballancing the lending risk, with increased capital requirements. This makes the banks healthy. I would rather a slight negative drop in the market, GDP at 7% growth, trillions in reserves over a "false" market. 

Expect the market to rebound running upto the Oct 1 holidays.

HHASIA

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