China Excess Cash.
China on Wednesday, 10th Nov 2010 again raised reserved requirement ratios (RRR) as to lock up some more cash from their 9-10% economy.
For Chinas’ big banks this is a sign of how serious China is over the clamping down on liquidity. This is on the back ground that China inflation rose to a 2 year high (25months) of 4.4%.
As their central bank did so the main stock market contracted by 2% on Wednesday and almost the same on Friday (ShangHai ‘s SSE Composite Index fell more than 4% Friday).
According to some analysts China's excess cash in the economy is abundance thus the RRR increase of 50 basis points will do little to the stock market. (since early October '10 it has risen by 20%).
The unprecedented lending spree will still go on. The QE2 of US$600 billion by US is expected to flow a US$70billion into India’s market, what about China and South East Asia?
You guess is as good as the rest out there. This week will see more profit taking on the background of the currency war between China and US. There will be a string of economic data coming out from US and UK, but as indicators (outlook on growth and inflation) are announce the market should remain bullish as we move forward.
TJ
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