Mainland stocks may fall today on mild profit taking as investors take the increase in banks' reserve requirement ratio, announced yesterday, as an excuse to cash in. 'The impact will be limited as 10.5 per cent is still much lower than the 20 per cent of Hong Kong commercial banks, so the money creation ability of mainland banks remains strong,' said Castor Pang, a strategist at Sun Hung Kai Financial. 'With A shares having reached record highs in recent days, investors may take this opportunity to take profit first. But the correction will not be deep.' The central bank has ordered commercial banks to set aside more money as reserves for the sixth time in 10 months by raising the reserve ratio to 10.5 per cent from 10 per cent, with effect from Monday. The move was aimed at further controlling liquidity and curbing lending, the People's Bank of China said on its website. The Shanghai Composite Index extended its four-day winning streak yesterday, rising 0.84 per cent to a record 3,319.14 points. The Shenzhen Composite Index gained 1.41 per cent to a new high of 876.838 points. The Shanghai index has soared almost 20 per cent since the market fell 8.8 per cent on February 27 when rumours that a capital gains tax might be imposed on stock trading to discourage investors from buying A shares sparked the sharpest fall in a decade. The World Bank has warned that asset markets in East Asia and elsewhere are likely to be more volatile in the coming period, citing as evidence the February sell-off on the Shanghai stock exchange. 'The end-February sell-off of Chinese stocks seemingly triggered, for the first time, a global sell-off. Chinese equity markets remain volatile, as do markets in other countries,' the World Bank said in its biannual update for the East Asia and Pacific region. 'The broad dive in late February reflected the powerful influence of globalisation, as well as the mainland's increasing influence across the world,' said Auyeung Tat, a fund manager at Apex Capital Management. However, Shang Fulin, chairman of the China Securities Regulatory Commission, early last month countered the argument that the fall in Chinese stocks induced a global stock market decline. The size of the mainland stock market was so small and its interconnection with global markets was so low that the country's market alone could not shake the whole world market, he said. His view has support among western economists. 'We don't see the link,' said Michael Spencer, Asia-Pacific chief economist at Deutsche Bank. 'There's very little foreign money in the A-share market. QFII allocations for all types of investments are only US$9 billion,' he said, referring to the qualified foreign institutional investor scheme, which serves as a channel for overseas funds to buy mainland stocks. 'And the issues that seem to have triggered the sell-off in the A-share market are not shared by most other markets.'