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Chinese shares dip as Lunar New Year weighs new policies

(Xinhua)
Updated: 2010-02-23 09:33

SHANGHAI: Chinese equities fell Monday, the first trading day of the Year of Tiger in the nation's lunar calendar, after a nine-day holiday break, as market participants considered new policies and rules the government adopted prior to and after the festival.

The benchmark Shanghai Composite Index on the Shanghai Stock Exchange closed at 3,003.4 points Monday, down 0.49 percent, or 14.74 points, from the previous close.

The Shenzhen Component Index on the smaller Shenzhen Stock Exchange ended at 12,213.54 points, down 91.24 points, or 0.74 percent.

Analysts said that proceedings in preparation for upcoming trade in stock index futures, the approach of margin trading and signs of central bank liquidity tightening over the past couple weeks accounted for the lackluster market performance.

On Feb 8, a system for eligibility to trade stock index futures was unveiled. On Feb 20, the China Securities Regulatory Commission, the industry watchdog, approved the stock index futures contract trading and related rules.

On Feb 12, the central bank announced it would raise commercial banks' reserve requirement ratio by 0.5 percentage points to 16.5 percent on Feb 25. It was the second upward adjustment of the ratio within one month, and stock markets interpreted the adjustment as a sign of further money supply tightening.

"Quite a lot of new policies and rules came out in a short period of time. That has made investors cautious. Such a phenomenon has seldom been seen at previous Lunar New Years," said Qiu Yanying, chief analyst with Shanghai-based TX Investment Consulting Co.

The series of new polices confused some retail investors like Ba Shen from Shanghai.

"I hesitate between short-term speculation and long-term holding. And I don't know in which stocks and sectors I should make investment," he said.

But some analysts are optimistic.

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