Sunday evening (Eastern time) which is Monday morning (Far East Time) could freature market volatility. The People's Bank of China is lifting its benchmark lending rate 27-basis points to 6.39% effective Sunday March 18, 2007, according to its website. This is the third rate increase in 11 months as Chinese monetary authorities continue a campaign to cool growth and investment and stabilize the Chinese economy which has grown at over 10% in each of the last 4 years. This latest increase follows by less than a month a February 25th decision by the PBoC to raise banking reserve requirements which sent shudders through world financial markets after the Shanghai stock market tumbled in reaction to the reserve requirement change.
Given recent economic data showing on going torrid economic activity, most economists were expecting the People's Bank to lift rates, though timing had been uncertain until Friday. The Shanghai Composite fell .7% Friday on renewed speculation a rate hike was imminent.
The reaction of Far Eastern markets to the rate increase is any one's guess. Late Friday in Shanghai, AP quoted Zhou Lin, an analyst at Huatai Securities as saying, "Even if an interest rate hike occurs tonight, the stock market could slump for only one or two days and should recover quickly, because such a rate hike is widely expected."
Not only are interest rates going higher in China, but it's pretty much a done deal that tax rates on foreign companies are set to rise as well. Click here China Tax Rate.
No comments:
Post a Comment