China clamps down on stamp duty in bid to boost market
SHANGHAI, April 24 – The central government lowered the stamp duty on stocks from 0.3 percent to 0.1 percent today in an effort to stabilize the market.
China also introduced two new rules to tighten securities management in a move to restore investor confidence in the beleaguered stock market.
“After the recent drops in share prices, the stock market has already been through sufficient correction, but it needs a trigger to set off a rebound,” said Yan Li, an analyst with Southwest securities. “The stamp tax cut is exactly that trigger,” she told Agence France-Presse.
The new regulations have been long awaited by many experts following the poor performance of the stock market which has heightened panic and premature selling amidst many investors. “Such moves, strong and consecutive, are clear signals that the authorities hope to rescue the market,” Sun Lijian, a finance professor at Fudan University told the Shanghai Daily.
In support of the government’s efforts to reconcile a deteriorating stock market Qiu Yanying, an analyst TX Investment Consulting, told Xinhua that “confidence in recovery is more important than fund injections.” Following previous uncertainties it is imperative that the government stabilizes the market and they are adamant to evoke change however, “after earlier panics and irrational selling amid a breakdown in confidence, it is hard for a market to return to normal,” said Qiu.
The number of new accounts opened dropped by a third in the first quarter in comparison to those of last year. First-quarter losses by 346 mutual funds in China reached RMB647.5 billion which was eight times the amount of the previous quarter. The decline in the stock market has brought much anticipation and unrest amongst the public too, many of whom have invested their savings in the market.
China tripled the stamp duty on trading in May 2007 from 0.1 percent to 0.3 percent in an effort to slow the market and prevent it from overheating. However, with the market now in what appears to be a state of free fall, the government has had to revoke their increase to its former stamp duty of 0.1 percent.
The Shanghai Composite Index, which covers A and B shares, closed up 130.54 points or 4.15 percent at 3,278.33 on a turnover of RMB86.1 billion on Wednesday, and the government hope the implementation of slashed stamp duty on stocks will see a rise in the Chinese stock market once again.
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