By DailyFX – China Stock Markets Continue Decline, Bubble Concerns Surface Roiled by comments made by central bank Governor Zhou Xiaochuan, equity markets were taken… … back as investors continued to fret over another plausible rate hike in the short term.

Over the weekend, the governor not only noted that share values were
completely overvalued, but that central bank policy makers werent able to rule
out a near term rate hike. Were not sure whether theres a clear bubble but
we worry , Zhou told reporters in Basel, Switzerland. We dont rule out
further rate increases if necessary.” As a result, with speculation heightened,
traders pared back shares on the CSI 300 benchmark, taking the index lower by 4.3
percent in the overnight session. Falling 173.84 points, the index closed at
3,877.59. Incidentally, the Shanghai Composite dropped 3.7 percent to close at
3,941.08. Banking and insurance stocks helped to mitigate the overall decline, as
sentiment remains high that equity speculation will likely continue despite recent
warnings. The bearish undertones helped to fuel declines in other markets, notably
in Hong Kong and Singapore. Shares in Hong Kong slid from a record as the Hang Seng
dropped 177.55 to close at 21,822.35. The Singapore Straits Times index wasnt
able to fare any better dropping 35.05 points to close at 3,580.33.

DailyFX Research Team
Forex Capital Markets LLC
32 Old Slip, 10th Floor
New York, NY 10004
Tel (212) 897-7660
Fax (212) 897-7669
E-mail: research@dailyfx.com

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