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Bulls Ignore Bank Policy Changes
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The mainland stock market rose 1.04 percent to a record high yesterday despite increases in interest rates and bank reserve ratio on Friday.


The Shanghai Composite Index climbed 41.97 points to close at 4,072.22, with 666 out of 906 companies closing higher.


The indicator opened 3.2 percent lower in the morning, but rebounded quickly. The turnover on the Shanghai exchange was heavy, at 209.6 billion yuan, up from Friday's 173.65 billion yuan.


The smaller Shenzhen Composite Index rose 24.74 points, or 2.14 percent, to close at 1,181.42. The foreign-currency-denominated B-share Index was up 1.38 percent to close at 365.65.


Calling Friday's policies mild, analysts said the impact will be gradual but the government may take more measures to cool down the market and mop up excess liquidity.


"Obviously, the market has shrugged off the mildly higher interest rates as insignificant," Stephen Green, senior economist of Standard Chartered, said yesterday.


"The interest rate hike has long been expected, and has already been absorbed by the market," said Wu Jianxiong, an analyst at Guotai Jun'an Securities. "Besides, individual investors are less sensitive to these mild changes."


China International Fund Management said in yesterday's report the impact of the measures will be gradual.


"We will see more policies. Beijing is trying to take things slowly, trying not to overshoot. But we are likely to see more action in the coming days, including comments from senior leaders and perhaps movement on sale of State shares," Green said.


Yu Yongding, a former adviser to the People's Bank of China, said in an article in China Securities Journal yesterday that the central bank will surely ratchet up its adjustment efforts if the problem of excess liquidity can't be solved, and if the imbalances and unstable elements persist in China's economy.


Companies in real estate sector performed well yesterday. Chongqing Yukaifa Co Ltd soared to its daily limit to close at 16.58 yuan while Poly Real Estate Group jumped 4.77 percent to close at 25.99 yuan. Companies in steel and utility sectors also performed well.


Banking stocks did not perform well following the rise in interest rates and reserve ratio. CITIC dropped 1.57 percent to close at 10.64 yuan while Bank of China fell 1.03 percent to close at 5.75 yuan.


(China Daily May 22, 2007)


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