China's key stock index tumbles five per cent on bank reserve rate hike news

THE ASSOCIATED PRESS
SHANGHAI, China - China's most-watched stock index fallen five per cent following the central bank's latest credit-tightening move.

By late morning Tuesday, the Shanghai Composite index had lost 161.51 points to 3,164.16. Property firms and banks, industries most likely to feel pressure from the central bank's weekend decision ordering banks to keep more deposits on hand, are leading the decline.

Chinese financial markets were closed Monday for a national holiday.

The People's Bank of China ordered a one percentage point increase in banks' reserve ratio, half to be done on June 15 and the rest on June 25. The phased-in increase was aimed at easing inflation that is at 12-year highs without unduly slowing the dynamic economic growth needed to create jobs.

© The Canadian Press, 2008