Hong Kong stocks dived 207.52 points, or 1.01 percent to close the trading at 20,526.50 Monday under the worries of further money tightening policy by the central government, an effort to prevent the bubble break of mainland stock market.
Chinese mainland banks Sunday were asked by the central bank to set aside more money in reserves, increasing the reserve ratio by 50 basis points, the fourth increase since the start of the year, bringing the total reserve ratio to 11 percent. The policy is considered as an effort to cool down the economy and reduce the possible risk of overbuying in the stock markets.
Hong Kong stock market, which is increasingly dependent on the economic development of the Chinese mainland and sensitive to the up and down of mainland stock markets, opened flat and dived 396 points in the morning to the day's low of 20,130, as the worries for further tightening policy getting worse.
The down trend continued in the afternoon, but slowed down the pace as A share in Shanghai kept going up despite the possible threat of interest increase by the central bank.
Commentators said most investors in Hong Kong market are watching and trying to feel the market's direction before taking any action. They are afraid of further tightening policy after the week-long Labor Day holiday if the reserve rise can not cool the boom of the mainland stock markets.
Market turnover went down to 49.84 billion HK dollars (6.39 billion U.S. dollars) from Friday's 64.17 billion HK dollars.
Analysts believe it is possible for group investors to take the advantage of the economic tightening policy to push the Hong Kong market down. Meanwhile, small investors are selling to reduce the risk of possible breaking down after the Labor Day holiday.
However, brokers predicted that the central government may not introduce further containing policy right after the holiday though the reserve rise has not brought the immediate effect to the mainland stock markets. They believed the reserve increase is an effort to test the market reflection and let the market do self-adjustment. SOURCE: Government of China
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