Asian markets fall as China curbs lending
China's top six banks have been told to cut back lending by around 200 billion yuan over the next two months as the country battles surging inflation and property prices.
The curb on lending failed to dampen the Shanghai stock exchange, which rose 0.82pc to 2830 points in afternoon trading, but other Asian markets all dipped.
Japan's benchmark Nikkei 225 stock index fell 1.8pc to 9,412.70 points after being closed for a holiday on Monday. South Korea's Kospi slipped 1.1pc to 1,869.57 while Hong Kong's Hang Seng index dropped 0.5pc to 23,087.42. Markets in Singapore, Taiwan and India also fell.
Although there was no official announcement, economists at Goldman Sachs said they had confirmed through their channels at China's commercial banks that the central bank had raised the reserve requirement ratio by 0.5pc points to 17.5pc for six banks.
The rise is equivalent to a lock-up on around 200 billion yuan, according to calculations by Goldman Sachs.
ICBC, China Construction Bank, Bank of China and the Agricultural Bank of China, together with China Merchants' Bank and Minsheng Bank will face the curb over the next two months.
Chinese authorities announced 3.5pc inflation in the consumer price index in August, the highest reading in almost two years. Rocketing food prices and property prices, in particular, have led to widespread complaints among poorer Chinese, many of whom live on wages of under £150 a month.
"The central bank is the government ministry which has the specific responsibility to control inflation, and is likely to be more willing to tighten [money supply] because of this," said Yu Song, at Goldman Sachs.
The central bank appears to have stepped in after several months of loose controls on bank lending by the Chinese Banking Regulatory Commission (CBRC). In August, Chinese banks lent 545 billion yuan, and Goldman Sachs believes the total for September is higher.
If the monetary authorities intend to hit the official target of 7.5 trillion yuan of new loans in 2010, banks will have to reduce their lending to around 400 billion yuan per month for the rest of the year.
Meanwhile, the CBRC said it would strictly check lending in Shanghai and curb loans to property developers as the property market in China’s biggest city threatened to overheat.
Yan Qingmin, the head of the CBRC in Shanghai told China Central Television that stress tests had shown that bank's bad loan ratios would increase by 2pc if property prices fell by 50pc.
Source: Telegraph.co.uk
Date: 13.10.2010 [ID: 266]