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Stock market

News on the possible interest tax adjustment and the bond sale has affected the stock market for several days.

Special coverage: Interest Rate Hike Markets Watch Red Chips Return Related readings:  Interest tax may be cut or suspended soon  A duo of measures considered to stop deposit outflow  Special bond issuance targets excess liquidity  Hot money inflows to be curbed

The benchmark Shanghai Composite Index fell 2.39 percent on Friday to close at 3,820.70 points, extending a four percent loss on the previous session. The declines followed a 3.68 percent fall on Monday and a 3.29 percent drop on last Friday.

Analysts expected the market to remain weak for several days as the bond sales might soak up money that would otherwise have gone into stocks. Bank deposits will also become more attractive after the interest tax is reduced or cancelled.

However, given the widening trade surplus and inflow of foreign direct investment, the market would continue to experience excess liquidity.

In addition, even after the cancellation of the interest tax, the real interest rate is still in negative territory and far below the return from stocks and mutual funds. Thus the exodus of deposits is unlikely to stop, analysts said.

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