Shanghai Daily news

Shares in Shanghai slumped yesterday led by real estate and related sectors after China's central bank announced a rise in its benchmark interest rates for the first time in nine years.
The Shanghai Composite Index, which covers both yuan-denominated A shares and hard-currency B shares, dropped 1.58 percent to 1,320.54. The A-share Index also lost 1.57 percent to 1,385.67, while the B-share Index shed 2.56 percent to 85.09.
The People's Bank of China raised the one-year lending rate to 5.58 percent from 5.31 percent from yesterday. The last time the rate was raised was in July 1995.
The PBOC also raised the one-year deposit rate 27 basis points from 1.98 percent, the first increase since July 1993.
The new rate is 2.25 percent.
Analysts viewed the rate move would not strongly influence the local stock market because of the small increase.
"The rise happened quite suddenly. Both Premier Wen Jiabao and Zhou Xiaochuan (governor of the central bank) said previously the rates would not be raised within this year. But it came really, without any warning," said Wei Wei, a West China Securities Co Ltd.
"But the increase was small, even lower than our previous expectation of 0.5 percentage point," she said. "So its negative effect will be very limited."
She noted if the rise went above 1 percentage points or if the government raised the rates successively, the influence on the share market would be much stronger.
"The listed companies' earnings may shrink a little, which will be possibly reflected in their last quarter's reports. But it is not very likely to last longer," she added.
Besides, analysts also believed that the rise in the interest rates would put pressure in the near term on listed companies with large liabilities, such as real estate companies, raw material suppliers, petrochemical industry, steelmakers and automotive manufacturers.
The central government has restricted loans to the steelmaking, auto and real estate industries on concerns of surplus capacity, as part of measures to curb economic growth.
"It is most likely that real estate developers will be affected (by the rate move). Then it will spread and affect the raw material industry like cement suppliers," said Zhang Qi, an analyst with Haitong Securities Co Ltd.
Shanghai-listed real estate developer Nanjing Chixia Development Co Ltd almost slipped to its trading limit, losing 9.61 percent to close at 11.1 yuan (US$1.34).
Beijing Vantone Pioneer Real Estate Co Ltd shed 9.48 percent to 10.6 yuan, while Anhui Conch Cement Co Ltd dived 8.51 percent to 9.14 yuan.
However, "listed real estate companies generally have strong capabilities to resist risks. They should be able to offset the curb on their earnings in a short time," said West China's Wei.
Chinese steelmakers, including Baoshan Iron and Steel Co, declined. Baoshan, the listed unit of the world's sixth-largest steelmaker, withdrew 3.06 percent to 5.71 yuan. Wuhan Iron and Steel Co, the country's third-largest publicly traded steelmaker, tumbled 4.51 percent to 3.39 yuan.
"But the rise must be good news for banks, especially after the central bank loosened the country's heavily regulated interest regime by removing the ceiling on the floating range," said Haitong's Zhang.
Commercial banks can adjust lending rates to factor credit risk, and the difference between rates for deposits and loans may be considerable, Zhang noted.
China Merchants Bank Co, the nation's largest publicly traded lender, advanced 1.14 percent to 8.85 yuan.
The bank said in statement yesterday they would begin the sale of convertible bonds worth 6.5 billion yuan next week as it seeks to boost capital and strengthen operations.
The five-year bonds will be offered to existing shareholders first, and then to other institutional and individual investors starting next Thursday, the statement to the Shanghai Stock Exchange said.