China’s central bank said over the weekend it will lower the reserve requirement ratio (RRR) that banks must hold as reserves to 20.5 percent from 21 percent, effective Friday. This 50 basis points (bp) reduction will free up tens of billions of dollars for loans at a time when the growth rate is expected to drop from last quarter’s 8.9 percent to closer to 8 percent. This is the second rate cut in two months.
Chinese real construction companies, and global commodity stocks, especially base metals like copper and aluminium, should benefit from this move. Investors hoping for more lending in the real estate sector pushed up Chinese property shares and banks. Hong Kong-listed China Resources Land Ltd. rose 1 percent and China Overseas Land & Investment Ltd. added 1.3 percent. China Construction Bank Corp. added 1.1 percent.
World stock markets were also positive on hope that Greece will clinch the aid to avoid bankruptcy. Whether Greece can actually implement and deliver an auterity plan is not a consideration for now! Continue reading China reduces Reserve Requirement Ratio by 50bp→
20 Jan 2011: Wall Street tracked declines in equities around the world after growth in gross domestic product in China accelerated to a 9.8% rate in the final quarter of 2010. The faster-than-forecast growth rate bolstered concerns that China would do more interest-rate hikes to control inflation, thereby reducing Chinese demand for commodities and raw materials, potentially derailing the global economic recovery.
US stocks were in constant search of direction the whole day. For every five stocks climbing, nine fell on the NYSE, with nearly 1.2 billion shares traded. Stocks suffered a big loss in the initial trading hours but managed to move up later in the day as better than expected economic data tried to pull up stocks. A strong dollar and concerns that China might go for further tightening of its macro economic policies put a brake on this. Continue reading Positive US Economic Data supports US stocks – 20 Jan 2011→
The RBI said that the weight of monetary policy balance may have to shift to containing inflation since high inflation itself will dampen recovery in growth. The RBI said it has not increased interest more than 25 bps because it believes that investments need to come in to improve the supply side inflation.
CRR is hiked to 6% from 5.75%, the reverse repo is raised to 3.75% from 3.5% and the repo is increased to 5.25% from 5%. While the policy rates are effective immediately, the CRR hike will be effective from April 24.
Hero Honda Motors after market hours announced its net profit rose 48.8% to Rs 598.81 crore on 19.6% rise in total income to Rs 4191.81 crore in Q4 March 2010 over Q4 March 2009.
Nifty snapped the five-day losing streak led by bounce in global markets post Goldman Sachs woes and RBI’s Monetary Policy, which was in-line with expectations. The 30-share BSE Sensex closed at 17,460 up 60 points and the 50-share NSE Nifty rose 26.45 points or 0.51% to 5.230
Global Markets:
US markets rose on Monday as investors reassessed the potential damage of the fraud case against Goldman Sachs and earnings optimism grew – the Dow Jones Industrial Average rose 73.59 points (0.67%) to 11092
European stocks rose in early trade on Tuesday, reversing losses from the previous session, with European banks gaining and car makers strong as Daimler rose after doubling its profit outlook.
Inflation rate in UK jumped more than economists forecasted in March, breaching the government’s upper limit for the second time this year after energy costs rose within weeks of the election. Consumer prices climbed 3.4 percent from a year earlier.
Asian stocks rose on Tuesday, led by finance companies, as regulators were split on suing Goldman Sachs Group Inc., easing concern over the impact increased regulation on banks. The key benchmark indices in Hong Kong, Japan, Indonesia, South Korea, Singapore and Taiwan rose by between 0.25% to 0.76%