China's inflation rose in August to the highest level in more than a decade while the country's August trade surplus climbed to its second-highest level ever. The Mainland's CPI rose 6.5% year on year (the target at the beginning of the year was 3%).
Investors were cautious that the central bank will further tighten liquidity. The central bank had raised interest rates 4 times this year, and increased bank reserve ratios 7 times. Shanghai fell 4.5% and Shenzhen fell 4.4%. HK managed to stay fairly steady because the valuations had not risen at the same pace as the Mainland markets.
China announced it's foreign exchange reserves is now almost US$1.4 trillion in July 2007. Since the first Mainland enterprise (Tsingtao Beer) listed in HK in 1993, Mainland enterprises have now raised US$200 billion in the HK market one-seventh of the country's foreign reserves. Yes, HK benefited from Mainland enterprises listing here, but we also played a part in building the financial infrastrucutre.
The recently announced through train, QDII relaxations etc. are aimed at reducing inflationary pressures on the Mainland by trying to divert some of the liquidity slooshing around into investments in HK.
Market Indices
Hong Kong Hang Seng: 23952.24 - 0.20%
Japan Nikkei: 15877.67 + 0.71%
Shanghai Composite: 5113.96 - 4.51%
Singapore STI: 3494.57 + 1.53%
South Korea Composite: 1847.36 + 0.63%
Taiwan Weighted: 9003.12 + 0.73%
*Intraday trading
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