<P><FONT size=4>星展银行—中国加息可能性提高 04.20</FONT></P><FONT size=4>Economics</FONT>
<P><FONT size=4>CN: More rate hikes to come</FONT></P>
<P><FONT size=4>DBS Group Research 20 April 2007</FONT></P>


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<P>Revisions to interest rate and reserve requirement ratio projections<BR>First quarter GDP growth accelerated to 11.1% YoY (in line with DBS forecast and market consensus of 11% YoY),<BR>from 10.4% YoY in 4Q06 despite a Mar07 rate hike (the third since Apr06) and banks’ reserve requirement ratio<BR>(RRR) being raised by 150bps this year alone (Chart 1). Indicators across the board have shown few signs of deceleration.<BR>Persistently low real interest rates have encouraged both enterprises and depositors to take higher risks. The<BR>Shanghai and Shenzhen A-share markets have risen 35% and 86% respectively so far this year.<BR>Strong growth, an ever widening trade surplus, continued<BR>rapid liquidity growth and higher inflation all point to<BR>further tightening measures ahead. We have added<BR>another 27bps interest rate hike to our</P>