KLCI is down because of China increased its deposit reserve ration by 0.5 % to 19%

At 2:44pm, KLCI is down by 16.38 recorded at 1550.13.

Why is market down? This is because last Friday, the central bank of China, People's Bank of China(PBoC) has announced that banking institutions of China are required to further raise the renminbi deposit reserve ratio by 0.5 percentage point as from January 20, 2011.

Check the posting on the internet as follows:

www.yicai.com (January 17, 2011)

Banks Required to Raise Renminbi Deposit Reserve Ratio
Posted on: Mon, 17 Jan 2011 05:55:47 EST

BEIJING, Jan 17, 2011 (SinoCast Daily Business Beat via COMTEX) --

As the central bank of China, People's Bank of China (PBoC) has required banking institutions to further raise the renminbi deposit reserve ratio by 0.5 percentage point as from January 20, 2011.

Over the past year, the country's commercial banks had raised the raise the renminbi deposit reserve ratio by three percentage points for six times. After the adjustment this time, four of the country's large state lenders, including Industrial and Commercial Bank of China (601398.SH, 1398.HK), Bank of China (601988.SH, 3988.HK), China Construction Bank (601939.SH, 0939.HK) and Agricultural Bank of China (601288.SH, 1288.HK), will see their deposit reserve ratio stand at 19.0%.

One official with PBoC has pointed out that the central bank is understood to tighten the liquidity via the move; and such a decision is made based upon the status of funds outstanding for foreign exchange. As available data showed, the new incremental foreign exchange reserves of China were USD 199 billion during the last quarter of 2010, thus hitting the quarterly high ever since 1997. By month, the nation's foreign exchange reserves added USD 112.6 billion, USD 6.9 billion and USD 79.5 billion in October, November and December 2010, respectively.

As for the funds outstanding for foreign exchange, the whole-year amount reached CNY 22.58 trillion in 2010, with the figure of CNY 403 billion in last December alone. With the appreciation of Chinese Yuan, up to CNY 400 billion funds outstanding for foreign exchange are expected for January 2011.

As from December 26, 2010, banking financial institutions of China were asked to adjust up the benchmark loan rate and benchmark deposit rate further. This was the second time for the country's central bank to raise the benchmark interest rates within 2010, after which, the benchmark interest rate for one-year deposits was 2.75% and the benchmark interest rate for one-year loans was 5.81%. Also, the interest rates of two-year, three-year and five-year deposits have been adjusted by 0.3%, 0.3% and 0.35% respectively; and the interest rates for three-month and half-year deposits have been raised by 0.34% and 0.3% respectively. As for the main reason of the move, the regulatory department is believed to try to tighten the liquidity and mitigate the inflation pressure.

Vice Governor of the central bank said that the authority is going to adopt various tools of monetary policy at the next step, such as the adjustment of deposit reserve ratio, the adjustment of benchmark interest rate, and the open market operation. An economist with the Industrial Bank predicts that more such moves will be carried out in 2011.

(USD 1 = CNY 6.59)

Source: www.yicai.com (January 17, 2011)

Blogger:

While studied the market in a trading perspective, I realized more that all the stocks have got its cycle. If you can read it well, you can make money all the time.

Takaso(7071) does not have big players, just small players. Even so you can buy low and sell high. How you do it? You check it out.

Salcon(8567) is getting hit. If it cannot break thru 0.70, it has to consolidate at a lower level,

Muiind(3891) went up because of the insurance deal. It is still under negotiation. Why it came down? That is the issue. You see even stock that carried the news will also come down because that is technical.

Unisem(5005) came down to 2.13 and rebound to 2.18 at 3:01 pm. This stock is on the trend because there is a news from oversea that the demand for chips is still strong.

How not to get the timing wrong? How to get the right price? These are important.

I find that I have to check the chart before I do any investment otherwise it will always be either buying at the wrong price or it is at the wrong timing.

Trading or investing is a serious business. Have to be careful.