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China's tighten policies

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Why adopt the tighten polices?
What measures did China take?
What effects?

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GLOBAL MARKETS-Stocks take China tightening in stride, euro falls
* Euro decline seen limited on rate differential story
* More gains for emerging Asian FX seen - PIMCO
* Gold hits another record, ETF holdings rise


HONG KONG, April 18 (Reuters) - Asian stocks rose on Monday as investors bet that China's latest round of policy tightening won't dent prospects of a global economic recovery while the euro weakened on a broad wave of profit-taking.

China on Sunday raised banks' reserve requirements for the fourth time this year. The move was not a surprise as market players had predicted more tightening after last week's data showed an acceleration in inflation.


Beijing's latest policy action is a sign that authorities across the region are intensifying their battle, using interest rate increases and strengthening currencies, to rein in imported inflation due to rising commodity prices.

Singapore sanctioned an increase in the value of its currency last week while the Bank of Thailand is likely to raise interest rates at a review on Wednesday.

In a sign that Beijing's latest action was well anticipated, both Chinese and Hong Kong stocks were trading higher on the day after opening lower.




GOOD PERFORMER

Shanghai has been the best performing stock market so far this year with gains of about 9 percent as authorities have repeatedly raised reserve requirements and increased rates. In contrast, India's troubles in tackling inflation have

seen that market decline by 5.5 percent on a year-to-date basis.

Elsehwere, Japan's Nikkei dipped, weighed by declines in telecommunications shares. Outside Japan, MSCI's index of Asia Pacific shares edged higher. Korean shares hit another record high.

With stronger currencies being used as a weapon to tackle inflation, investors are adding exposure to the Chinese yuan and the Singapore dollar and have turned bullish on the South Korean won's outlook .

PIMCO, the world's biggest bond fund manager, said the yuan and the won are "fundamentally undervalued".

EURO WEAKENS

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Japan Stocks Fall After Yen Gains, China Raises Reserve Quotas
April 18 (Bloomberg) -- Japanese stocks dropped for a second day led by exporters as the yen advanced and after China raised banks’ reserve requirements, limiting growth in Japan’s biggest overseas market.

Sony Corp., Japan’s No. 1 exporter of consumer electronics, lost 1 percent. Canon Inc. sank 1.2 percent after the yen gained, cutting the earnings outlook for the camera maker that gets about 80 percent of its sales overseas. TDK Corp., a manufacturer of electronic parts which gets almost a third of its revenue from China, declined 2.8 percent.

“There’s too much uncertainty for investors to be confident enough to take positions,” said Koichi Kurose, chief strategist in Tokyo at Resona Bank Ltd., which oversees the equivalent of $57 billion in assets. In China, “the tightening measures are dragging on, and this isn’t good for stocks or the economy.”

The Nikkei 225 Stock Average fell 0.2 percent to 9,573.04 at the 11 a.m. trading break in Tokyo, while the Topix dropped 0.2 percent to 839.25. The Topix has declined more than 8 percent since a magnitude-9 earthquake and tsunami on March 11 devastated Japan’s northeast coast and crippled a nuclear power plant.


Yen Hurts Exporters

The yen appreciated to as high as 82.86 against the dollar today in Tokyo, compared with 83.23 at the close of trading on April 15. Against the euro, Japan’s currency strengthened to 118.94 from 120.42. A stronger yen reduces overseas income at Japanese companies when repatriated.

TDK, which counts China as its largest market, sank 2.8 percent to 4,345 yen. Komatsu Ltd. a maker of construction equipment that has benefited from China’s building boom, fell 3 percent to 750 yen following measures by China’s central bank on April 15 to cool investment and tame inflation.

China increased banks’ reserve requirements to lock up cash and cool price gains after the world’s second-largest economy showed signs of overheating. Inflation accelerated to 5.4 percent, the most since July 2008, the statistics bureau said April 15.

-- with assistance from Satoshi Kawano in Tokyo. Editors: Jason Clenfield, Nick Gentle.

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Post time 2011-4-18 20:40:00 |Display all floors
Asian Stocks Swing Between Gains, Losses as China Builders Fall, AIA Jumps
.Asian stocks swung between gains and losses after China raised the reserve requirements for the country’s banks to tame inflation, fueling concern more tightening measures will curb economic growth. AIA Group Ltd. advanced in Hong Kong.

“The tightening measures are dragging on, and this isn’t good for stocks or the economy,” said Koichi Kurose, chief strategist in Tokyo at Resona Bank Ltd., which oversees the equivalent of $57 billion in assets. “There’s too much uncertainty for investors to be confident enough to take positions.”

China Policy Tightening
Reserve ratios will rise a half point from April 21, the People’s Bank of China said on its website yesterday, pushing the requirement to a record 20.5 percent for the biggest lenders. The move came less than two weeks after an interest-rate increase. Zhou sees no “absolute” limit on how high reserve requirements can go, he said April 16.

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Post time 2011-4-18 20:44:13 |Display all floors
China markets expected to take reserve rise in stride

SHANGHAI, April 18
(Reuters) - Chinese markets are likely to take Sunday's required reserve increase for banks in stride, as huge quantities of cash continue to flow into the financial system through maturing central bank bills and from overseas.

The People's Bank of China (PBOC) on Sunday raised the required reserve ratio for banks for the seventh time since last October, to a record 20.5 percent.

While the move will soak up about 360 billion yuan ($55.1 billion) that could otherwise have been lent out, nearly 450 billion yuan in central bank bills and repos will mature in the next two weeks alone, which is one reason many traders had expected the increase.

Because the move was widely expected, interest rate swaps (IRS) and government bond yields will probably rise only slightly on Monday and for the rest of the week, after edging up late last week in anticipation of further tightening.

The benchmark weighted-average seven-day repo rate , which jumped about 40 basis points late last week to 2.36 percent to take into account the likelihood of a bank reserve rise, could rise slightly on signs of the PBOC's determination to keep liquidity in check.

In the stock market, the Shanghai Composite Index , which breached the psychologically important 3,000-point mark last week, could hesitate in its recent rally, but should continue to rise in the medium-term given strong corporate earnings and ample liquidity in the system.

With the central bank making clear it is willing to use all tools at its disposal to contain inflation, the yuan will likely continue its steady crawl upwards against the dollar, which has seen it rise close to 1 percent so far this year.
Central bank governor Zhou Xiaochuan said on Saturday that the yuan would be one of the tools the PBOC uses in the inflation fight, underscoring comments by Premier Wen Jiabao earlier this month. ($1 = 6.533 yuan) (Reporting by Lu Jianxin and Jason Subler; Editing by Chris Lewis)

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