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Market will remain flat
Date:2011/1/17      View:858
 
The Shanghai market is likely to stay flat this week following the central bank's move to increase banks' reserve ratio to drain excess money out of the economy.

The benchmark Shanghai Composite Index shed 1.7 percent last week to close at 2,791.34 points on Friday.

The reserve requirement ratio will rise by 0.5 percentage points starting on Thursday, the People's Bank of China said last Friday, and China's biggest bank will face a record high of 19.5 percent requirement. This is the fourth move in more than two months to curb inflation.

"The market will remain flat as it is uncertain where monetary policies will head this year and whether inflation can be tackled," China Development Bank Securities' analyst Xing Zhenning said.

"There is still conflict between ensuring economic growth and curbing rising prices," Xing added.

Major economic data including the yearly gross domestic product growth and December's consumer price index is scheduled to be released on Thursday.

"The reserve ratio raise was obviously targeted at inflation and it's also a signal that banks should curb their lending or more measures will be enacted," said Fu Lichun, an economist at the Chinese Academy of Social Sciences.

The chief economist at the Bank of Communications, Lian Ping, also said there will be one or two interest rate hikes in the first quarter of 2011.

The country raised interest rates twice and the reserve requirement ratio six times in 2010.
 
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