Rise in money market rates hits Chinese shares

|By:, SA News Editor

Chinese short-term money market rates are on the rise again after the central bank again refrained from injecting liquidity into the system even though demand for cash is growing because banks need it for year-end regulatory requirements.

The seven-day repo rate climbed 72 bps to 7.02% after jumping 153 bps yesterday in what was the biggest increase since the People's Bank of China engineered a mini credit crunch in June.

Borrowing costs are also rising because the government is letting market forces have a greater influence over interest rates.

The increase in rates helped drag the Shanghai Composite down 1%, while the Hang Seng dropped 1.1%. The former index has slumped 4.2% this month and 6.2% this year.

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