China, Move On Be Master Stock Market

Hottest issue these days is conducted monetary tightening in China. By the new year Lunar New Year holiday on the day last Friday, China's central bank announced the latest tightening of monetary policy by raising the minimum mandatory deposits for major banks of China by 0.5 percent from February 25 this year.

Thus, the minimum required deposits for major banks China to 16.5 percent. This is the second time China raised the required minimum deposits. The last on January 18, 2010.

The policy was carried out by China's central bank to offset inflationary pressures that began to grow due to China's growing economic extraordinary. The inflation rate as measured by the consumer price index, rose 1.5 percent compared to last year to January 2010. And the possibility of inflation will be higher for the next months.

What is the impact of monetary tightening is the stock index?

As we have seen, China's monetary tightening is aimed at reducing credit expansion that has been done before by the major banks in China.

This credit is one source of income from banking and automatically reduces the possibility of banking income later. In addition, this tightening is also likely to cause companies that had been leaning business expansion through bank loans may be slightly disrupted business.

In essence, this monetary tightening aimed to absorb the liquidity that has so many digelontorkan to market and reduce and prevent hot money into the economy overheated or bubble.

In the short term this will certainly negatively affect the stock index stock index Asia especially China and Hong Kong. Banking stocks are shares of large and berkapitalisasi very influential to the movement of stock indices will be depressed. Once the property shares also indirectly related to banking conditions will also be depressed.

Throughout the year 2010, the market will pay close attention signals that monetary tightening by central banks in countries that previously poured so much money to support their economy.

Although monetary policy in the long run be good for economic development of countries concerned, but in the short term will suppress the movement of stock indices.