SHANGHAI Feb 21 China's CSI300 index,
which tracks China's largest listed firms, slid more than 3
percent on Thursday on concerns that recent central bank
behavior had signalled the beginning of a tightening cycle.
Analysts said that investors were worried the central bank
was draining funds more aggressively than expected. The People's
Bank of China let a net 910 billion yuan ($145.89 billion) drain
from the interbank market this week.
"The central bank drained over 800 billion yuan from the
money market, which sparked worries that liquidity conditions
might be tightening," said Chen Shaodan, analyst at New Times
In addition, the central bank this week returned to using
longer-term forward repos to drain funds, instead of reverse
repos which inject funds, for the first time since June.
A Reuters report citing sources that PBOC chief Zhou
Xiaochuan would be reappointed, despite reaching his mandatory
retirement age of 65, also spooked some investors, who believe
it signals that Beijing will continue to crack down on inflation
and tighten liquidity, analysts said.
Real estate markets started off the plunge. China's cabinet
on Wednesday restated its intention to extend a pilot property
tax programme to more cities and urged local authorities again
to put price control targets on new homes, in the latest effort
to calm frothy real estate markets.
However, real estate stocks recovered in late morning.
Finance and insurance stocks were the leading drag in the
Shanghai Composite Index at midday.
($1 = 6.2376 Chinese yuan)
(Reporting by Pete Sweeney and Chen Yixin; Editing by