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China may tighten monetary measures next year: economist

By Hu Yuanyuan (chinadaily.com.cn)
Updated: 2009-12-15 17:06

China's central bank may raise the banks' deposit ratio or interest rate in the first half year of 2010 probably after the two sessions of National People's Congress and Chinese People's Political Consultative Conference, says the chief investment strategist of UBS (Asia Pacific).

"The exact timing to launch the tightening monetary measures depends on the economy and CPI growth next year, but we believe China will face a serious inflation pressure in 2011 and a modest one in 2010," said Pu Yonghao, managing director of UBS (Asia Pacific) who is also the head of wealth management research and chief investment strategist of UBS (Asia Pacific).

Meanwhile, China's stock market is still attractive for investors next year, with the price per earning ratio hovering around 13 times, compared with more than 20 times this year. According to UBS analysts, emerging markets equities should offer average returns, including dividends, of approximately 15 percent in 2010 while developed markets equities should post returns of around 10 percent.

Commodities are also poised to perform well as economic growth revives and drives higher demand. They also offer important diversification benefits making them attractive given the uncertain inflation outlook.