16.5% hike of RRR freezes 300bn fund

Deposit Reserve ratio will be raised at 16.5 percent which could freezes funds by 300 billion yuan, presenting the second rise this year when the first effected on 18 of January.<?xml:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />

The expectation of the rise existed early at the market,  for credit fund have been released in January  at 1.4 trillion yuan, despite of quantitative measures adopted, displaying 300 billion beyond what is normal; Moreover, it will see the  mature of cash flow by 900 billion yuan in March, regarding the view of liquidity. Effectively, 600 billion yuan in all will be tied up by the two rises of reserve ratio.

Li Huiyong with Shenyin Wanguo says the second rise is probably a little weak than the first to have affection on the market, because of tightening expectation held beforehand.

Referring to directly affected  bank shares, Analyst Mao Jun with CICC says it has limited space dropping by bank shares, as potential ups of the spread is existing, with reference of ten-year P/E ratio average assessment.

Other economies are also about to take exit policy as the Federal Reserve has increased its discount rate to 0.75 percent from original 0.5 percent in February. Li Huiyong says one percentage point up is still available before the year end, or it will have to effect large increase of reserve ratio when credit control fails to meet the target, or cornered by hot money flowing inwardly resulted in the accumulation of exchange holdings.