A year ago, investors like Guan Ling were ebullient. The mainland Chinese stock markets had climbed about 500 percent in two years, setting off a stock buying frenzy.

When experts periodically warned about the possibility of a bubble, prices dipped temporarily, then soared even higher, breaking records and inciting another mad dash to snap up equities.

“The market was going wild,” said Guan, 49, who a few years ago closed his real estate company to invest in stocks full time. “Everybody was talking about how much they had earned, how much more they would invest and which stocks had jumped 20 times, or even 30 times.”

That was last year. The Shanghai composite index has plunged 45 percent from its high, reached last October. The first quarter of this year, which ended Monday with a huge sell-off, was the worst ever for the market.

© Kate Zhao for China Digital Times (CDT), 2008. | Permalink | One comment | Add to del.icio.us
Post tags: overheated market, shanghai stock market, small investors
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An increase in Chinese bank reserve ratios to a record high may flatten the yield curve while bringing closer a pullback in the soaring stock market, traders and analysts said Sunday.

The central bank announced Saturday that it was raising reserve ratios for the eighth time this year, starting Oct. 25. The half-percentage point increase takes the ratio for big banks to 13 percent – matching the record rate that applied from September 1988 to March 1998. Analysts said that the raise, in line with market expectations, was a signal to commercial banks that the central bank remained determined to restrain growth in money supply and bank lending. [Full Text]

© Kate Zhao for China Digital Times (CDT), 2007. | Permalink | No comment | Add to del.icio.us
Post tags: bank reserve ratio, overheated market
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