China's stocks fell driving down the benchmark index of the sixth of seven weeks

China's stocks fell, driving down the benchmark index of the sixth of seven weeks, the refers to a cash deficit will be more difficult for companies to borrow for expansion and new regulations in Beijing can limit sales car.

SAIC Motor Corp. fell to its lowest level in four months after the capital of China announced measures to restrict the number of new vehicles. Baoshan Iron & Steel Co. led declines for steelmakers in the prospect of falling car
demand

would curb earnings. Greenland Yunnan Biological Technology Co. shelter rate for small businesses amid speculation of higher ratios of the banks' reserve requirements, have led to a liquidity crisis.

"Do not be a surprise if the government announces the reserve ratio, or more increases in interest rates later this year as inflation control is a top priority for decision makers at the time," said Wu Kan, an administrator fund Dazhong Insurance Co., which oversees $ 285 million. "The market is also suffering a liquidity crisis near the end of the year and remain fluctuating in the short term."

The Shanghai Composite Index, which remains the largest stock exchanges in China, fell 20.1, or 0.7 percent, to 2,835.16 at 3 pm The index fell nearly 2 percent this week. The CSI 300 Index lost 0.8 percent to 3,162.96. The CSI SmallCap 500 fell 1.5 percent to lowest close since Dec. 9.

The Shanghai Composite Index, the worst performer among the major benchmarks in Asia this year, has dropped 13 percent in 2010 on concern the central bank will raise interest rates for the second time since October as part of strengthening policy measures to curb inflation that reached 28 months last month.

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SAIC Motor lost 2.3 percent to 15.63 yuan, the lowest close since 26 August. Beiqi Foton Motor Co. fell 4.5 percent to 24.88 yuan.

Beijing has introduced measures such as limiting the number of new passenger vehicles in China's capital to alleviate the congested roads. The government will issue a new quota of 240,000 vehicle license places through a lottery system next year, with 88 percent allocated to individual buyers, according to a statement released yesterday.

Nomura International cut its forecast for 2011 sales of passenger vehicles by 3 per cent to 13.4 per cent to reflect the possible effects of policy, Hou Yankun Nomura analyst said in a report released today.

"These measures will have a substantial impact on automobile sales," Hou said in the note. "The policy clarification catalysts central and local governments."

Baoshan Iron & Steel, the largest steel company publicly traded in China, fell 0.2 percent to 6.61 yuan. Wuhan Iron & Steel Co. lost 0.5 percent to 4.45 yuan.

Aluminium stocks

Aluminum Corp of China Ltd., the country's largest manufacturer of metal, fell 2.6 percent on speculation the shortage of power supply can reduce the production and income. Yunnan Aluminum Co. dropped 1.7 percent to 12.14 yuan.

Aluminum smelters in China could face a "shortage" of power that prevents them from ramping up production in the first quarter of 2011, helping to buoy stock prices and further declines, according to Macquarie Group Ltd.

"Our recent visit to Shanxi and Henan provinces suggested the power supply would still be in severe shortage during the winter due to tight supply of coal," analyst Bonnie Liu wrote in a report released today. Aluminum prices can be obtained in the next three or four months, he wrote, without giving a forecast.

Ministry of Finance of China sold 16.76 billion yuan (2530 million dollars) of securities to 91 days, below the planned target of 20 billion yuan, according to traders lead underwriters of public debt, which asked anonymity.

Cash crunch

The government has ordered banks to increase their reserve requirements six times this year to curb loan growth and prevent asset bubbles. The interest rate of seven days, which measures the cost of loans between banks, rose 150 basis points to 5.67 percent, the highest since October 2007, according to yesterday

SmallCaps indicator fell for the third consecutive day, the longest losing streak since September. Even with the fall of this week, the index trading 49.6 times reported earnings, compared with 18.8 times for the CSI 300. Yunnan Greenland sunk by the limit of 10 percent per day for a second day to 30.89 yuan, adding to a 22 percent slide this week. Tianjin Zhonghuan Semiconductor Joint-Stock Co. fell 8.2 percent to 25.85 today.

China property stocks can recover 25 percent from the current level until mid-January, in the absence of new measures to curb housing prices, according to Guotai Junan Securities.

The rebound may increase the valuations of developers to 13 times estimated earnings for 2011 from the current 10.5 times, and Pinke Sun Jianping Li, brokerage analysts wrote in a report released today. Investors should not have high expectations of the policy of detente curbs in the short term due to rapid price increases in the cities of second and third level of China, the report said.

Outlook Actions

China Vanke Co., the biggest developer, added 1.9 percent to 9.01 yuan. Gemdale Corp. climbed 5 percent or 6.58 yuan.

The measures of the policy tightening will be "largely by" next spring, prompting a rally for equities in the second half, according to Donald Straszheim, China research director at International Strategy & Investment Group .

"China's economy continue to grow rapidly in 2011 and inflation will fall," he said in an interview. "The tightening of monetary policy will be largely in the spring of the year. This will create a" buy "for the second half of 2011, a very nice rally in the shares of China."