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Apr-24-2008

China Eases Trading Rules and Markets Soar

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April 24 (Bloomberg) -- China's stocks surged, sending the Shanghai Composite Index to its biggest gain in more than six years, after the government cut the tax on equity trading to stem a slump that erased $1.7 trillion of market value. (More...)
The reduction in the stamp tax followed new trading rules announced during the weekend that ordered the selling of a large amount of shares be conducted on a bloc trading system. (More...)
The Nikkei 225 Stock Average closed down 0.3 percent at 13,540.87 with investors taking to the sidelines as the local reporting season set in. (More...)
The company said first-quarter profit fell 84 percent to 15.8 million yuan ($2.26 million) after snowstorms cut production and prices dropped. (More...)
The rollback was officially announced after markets closed Wednesday, but investors apparently got wind of the impending action earlier in the day, as the Shanghai index jumped 4.2%. (More...)
Lin Songli, analyst at Guosen Securities in Beijing, said the decision was expected because the market had sunk as far as the government was willing to tolerate. (More...)
China in December tripled to $30 billion the amount overseas institutions can invest in yuan- denominated stocks and bonds. (More...)
Sure enough the market shot up nearly 7% in the morning before giving away nearly 90% of the gains over the rest of the day. (More...)
Total capitalization swelled 4.26 percent to 21.03 trillion yuan ($3 trillion). (More...)
'The key index is likely to climb to around 4,000 points in the near term,' Zhang added. (More...)
"Market boost digested in just one day,'' sighed a headline in the daily financial newspaper China Business News. (More...)

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April 24 (Bloomberg) -- China's stocks surged, sending the Shanghai Composite Index to its biggest gain in more than six years, after the government cut the tax on equity trading to stem a slump that erased $1.7 trillion of market value. The index rose 9.3 percent, the most since Oct. 23, 2001, with more than half its members climbing by the daily limit. The government stepped in to boost the world's fourth-largest equity market two days after the Shanghai measure sank to less than 50 percent of its October record amid concern earnings growth will slow and share sales will overwhelm demand. [1] BEIJING, April 24 (Xinhua) -- The overnight announcement of a cut in share trading taxes drove Chinese stocks 9.29 percent higher in soaring turnover on Thursday, with the key Shanghai Composite Index up 304 points to 3,583.03, the largest gain since Oct. 23, 2001, when daily limits were introduced. The policy change, which slashed the stamp tax from 0.3 percent to 0.1 percent effective immediately, was announced two days after the benchmark index had fallen to half its peak of October 2007.[2] China has cut the share trading stamp tax from 0.3 percent to 0.1 percent from Thursday. The benchmark Shanghai Composite Index opened up 8 percent this morning on the news.[3]

China's main stock market index has ended the day more than nine per cent higher after a surprise cut in the tax levied on share transactions gave investors a much-needed boost. Thursday's close saw the benchmark Shanghai composite index end the trading day up 9.3 per cent, having lost more than half its value in the past six months.[4] At the long-awaited news, investors went into a buying spree, pushing the benchmark Shanghai Composite Index to open 7.98 percent higher at 3,539 points. More than 80 stocks jumped their daily limit of 10 percent at opening. The new tax move came after the country's stock market has fallen nearly 50 percent from its peak since mid-October in the face of a mixture of factors, including the over-valuation of shares, tight monetary policies, and concerns over the economy and corporate earnings due to a global economic slowdown.[5] SHANGHAI -- Beijing unveiled a plan to soften the negative impact of big share sales, a move that marked its strongest show of concern yet about its ailing stock market but that seemed to do little to ease investor concerns. The benchmark Shanghai Composite Index finished a volatile session with a 0.7% gain to 3116.97, its first rise in five trading sessions.[6]

The tax cut came on the heels of a separate government measure on Sunday to limit sales of large blocks of shares to off-market transactions. Taken together, they spelled Beijing's determination to arrest a stock market in free fall: The Shanghai composite index had plunged nearly 50% from its peak last fall to Friday's closing level.[7]

'The key to sustaining the upward trend is more measures to boost liquidity and investor confidence as well as the pace of new share offers,' said Yang. Earlier this week, the government imposed stricter curbs on transactions in newly-tradable shares that emerge from lock-up periods. It also resumed new fund approvals earlier this year, after an unofficial suspension that had been in place since September, while suspending the corporate income tax on the income of mutual funds. Other long-anticipated measures may not be forthcoming anytime soon, such as the introduction of stock index futures, which analysts have argued would perform a crucial function by hedging risk. 'It's out of the question that the government will launch stock index futures at this stage, because they want to see the market getting more mature and stable before taking such a move,' said Yu Zuojie, an analyst with Shanghai Securities.[8] Alarmed by an 11 per cent slide in the Shanghai index in the just the last week, the China Securities Regulatory Commission had also announced new restrictions on sales of large blocks of shares newly freed from lock-in periods on Sunday. The move was aimed at reassuring investors worried about some $430bn in previously non-traded shares due to flood the market this year. It seemed to do little to spur buying and for the first time in more than a year, the Shanghai bourse dropped below 3,000 points on Tuesday before rebounding later in the day.[4] Alarmed by an 11 percent slide in the Shanghai index last week, late on Sunday night the China Securities Regulatory Commission announced new restrictions on sales of large blocks of shares newly freed from lockup periods. That move, showcased in front-page headlines of state-run newspapers, was explicitly aimed at reassuring investors fretting over some 3 trillion yuan ($430 billion;euro273 billion) in previously nontraded shares due to enter the market this year. It did little to spur buying.[9]

The move will address concerns over a flood of shares coming into the secondary market, which could "put constant pressure on stock prices and distort the price formation mechanism," the China Securities Regulatory Commission said. The Shanghai index rose 4.15 percent to 3,278.33 on Wednesday, ahead of the tax cut announcement, but was still down 37.7 percent this year and 46 percent from its peak on Oct.16.[2]

Zhang Gang, an analyst at Central China Securities, told Xinhua Financial Network: "The stamp duty cut, together with the lock-up policy, definitely indicates that the Government wants to rescue the domestic stock markets following recent plunges." He said investors now expected further supportive measures, such as launching stock index futures and allowing investors to do margin trading. There are more than 130 million stock investors in China, and many of them are regular traders, constantly churning shares.[10] China tax cut reverses shares plunge BEIJING - Shares listed in China jumped almost 10% on Thursday, giving a benchmark index its biggest gain in more than six years, after the Chinese government cut the stamp tax on stock trading to boost an equities market that had fallen 50% from its record high on October 16 last year.[11] The tax cut to 0.1%, announced after the close of trading on Wednesday and effective the next session, reversed an increase from that level to 0.3% imposed on May 30 last year when the government was seeking, ineffectually, to cool a market that almost doubled last year. The Shanghai Composite Index gained 9.3%, its strongest showing since October 2001, to close at 3,583.03. Earlier in the week it had sunk to less than half its October record high. The CSI 300 Index, a benchmark for yuan-denominated shares traded in both Shanghai and Shenzhen, climbed 9.3% on Thursday, after a decline of almost 40% this year made it after Vietnam the world's second-worst performing benchmark.[11]

After the stamp duty was cut to 0.1 percent from 0.3 percent, the benchmark Shanghai Composite Index, which covers A and B shares, closed up 304.70 points, or 9.29 percent, at 3,583.03 on turnover of 189.6 billion yuan.[8] The overnight announcement of a cut in share trading taxes drove Chinese stocks 9.29 percent higher in soaring turnover on Thursday, with the key Shanghai Composite Index up 304 points to 3,583.03, the largest gain since Oct. 23, 2001, when daily limits were introduced.[12] BEIJING - Chinese shares surged 4.15 percent on Wednesday on a rally in financial, metal and mining stocks. The benchmark Shanghai Composite Index, which covers both A and B shares, closed up 4.15 percent, or 130.54 points to 3,278.33 on Wednesday. The index, however, was still 46.5 percent lower than its peak in October.[13]

Encouraged by the news, the Shanghai Composite Index, China 's benchmark index, jumped 304.70 points, or 9.29%, near the daily limit of 10%, and closed at 3583.03 points. Such a sharp increase has rarely been seen in China 's 18-year stock exchange history. This is not the first time the government has used the stamp tax to influence the stock market.[14] The long-awaited move rolls back the so-called stamp tax to the rate it was a year earlier, when Beijing raised the surcharge to cool what was then a heady market. Wednesday's reversal was aimed at arresting a stock market in freefall: The Shanghai market'''s benchmark composite index had plunged nearly 50% from its peak in October to last Friday'''s closing level.[15]

April 22 (Bloomberg) -- China's stocks dropped, driving the Shanghai Composite Index to 50 percent below its October record, as investors retreat from a stock market that had climbed almost sixfold in the previous two years.[16] "There's nothing to do but wait.'' Millions of individual Chinese investors dumped their savings into the stock market as the Shanghai Composite index soared 130 per cent in 2006 and 97 per cent in 2007. It has fallen sharply since hitting an all-time high of 6,124.04 in mid-October after regulators suspended sales of mutual funds to new subscribers, deflating what they feared was a bubble in stock prices.[9]

Alarmed by an 11 percent slide in the Shanghai index last week, the market regulator announced new restrictions late Sunday on sales of large blocks of shares newly freed from lockup periods. That move, showcased in front-page headlines of state newspapers, was aimed at reassuring investors who worry that the market will be diluted when US$430 billion in previously nontraded shares become available for trading this year. It seemed to do little to spur buying.[17] Huge buying orders overwhelmed the shorting side to help the SCI close the session 9.29 percent higher at 3,583.03, the biggest gain in more than six years. Trading volume of the Shanghai and Shenzhen bourses reached over 270 billion yuan, doubling their average transaction value,indicating a lot of investors are entering the market while many are cashing out. That showed many institutional investors were selling shares and the market sentiment has yet to stabilize, Guotai Jun'''an Securities said in a report. They expect the market to fluctuate between 2,800 and 4,300 points in the second quarter of this year.[18] The losses are mounting. Chinese mutual funds, the main vehicle for individual investments, lost 647.5 billion yuan ($93 billion;euro59 billion) in the first quarter of this year, with combined assets under management falling to 2.5 trillion yuan ($357 billion;euro224.56 billion), the official News Agency reported Tuesday. It cited figures compiled from earnings reports by TX Investment Consulting, a local securities company. Stocks that have been hit hard include PetroChina, a state-owned oil and gas giant that briefly became the world's first $1 trillion company after its initial public offering last autumn. By midday Wednesday, its shares were trading at 16.50 yuan, way below their trading debut peak of 43.96 yuan. Like many Chinese investors, Chen _ the flight attendent turned day trader _ is philosophical about her bad luck.[9] The China Securities Regulatory Commission had announced suddenly that all major shareholders could only sell large tranches of shares through a block trade or over the counter. Shareholders need to announce placement plans one month in advance if they want to sell more than 1 percent of a company's total stock. Market watchers said investors are still watching for blue-chip tradable shares worth 1.7 trillion yuan (HK$1.89 trillion) and 12 trillion yuan to come on to the market, this year and in 2009. "During past days, it's only those small caps dumping shares that have caused panic, people will be more skeptical for larger caps' similar moves," an analyst said.[19] Moving to stabilize the markets, the China Securities Regulatory Commission announced late Sunday that shareholders who want to sell large numbers of shares newly freed from lock-up periods must do so through the "block trading system." That requires such sales to be made through private negotiations between buyers and sellers of the large chunks of shares. It "is set to counter selling pressure on the public market and help relieve investors' worries over the impact of share disposals," the CSRC said in a statement. The rule, which applies whenever more than 1 percent of a listed firm's total shares are sold within a month, is expected to slow trading of such shares as they become tradable after initial public offerings or shareholding reform lockup periods, analysts said.[20]

Last week the Shanghai index fell nearly 12 per cent. With vast numbers of previously locked-up shares beginning to enter the market, diluting the value of investors' holdings, on Sunday night the China Securities Regulatory Commission announced that if the amount of shares released exceeded 1 per cent of the company's total, they had to be sold off-market as block trades. These are wholesale transactions through private negotiation, where buying interest is likely to be more limited.[10]

THE cut in China's share trading tax this week is likely to end a six-month bear market and might boost shares by more than 20 per cent in coming weeks, analysts and fund managers said. The reduction in the stamp tax, to 0.1per cent from 0.3per cent, will make little difference to investment costs for any but very active short-term traders, but Chinese investors take their cues from government policy, a legacy of its history as a command economy.[21] A 9.3 percent leap by China's stock market on Thursday, after the trading tax was cut, recalled the heights of the stock frenzy of 2006 and 2007, when millions of Chinese poured into the market for the first time in one of history's great equity bull runs. This time, there are signs that China's legion of individual investors has learned a painful lesson about risk during a market slide which halved share prices over the past six months.[22] China's main stock index soared over9 percent in frenzied trade on Thursday after the government cut the share trading tax, seeking to boost investors' confidence.[18] BEIJING, April 24 (Xinhua) -- Chinese shares soared on Thursday morning as an overnight stock trading tax cut boosted investors' confidence, with the major index rising 7.29 percent and nearly touching the daily ceiling in the morning session.[23]

The jump came after the government announced late Wednesday that it was cutting a stamp tax on share transactions to 0.1 percent from 0.3 percent. That reversed a tax increase imposed May 30 last year, when regulators were trying to cool surging stock prices. The communist Beijing government keeps its markets isolated from global money flows and most shares are off-limits to foreign buyers. Investors are watching them closely for signs of a possible recovery, and markets abroad often react to swings in Chinese prices.[24] BEIJING (AFP) — China has decided to cut the stamp duty on stock market transactions to 0.1 percent from 0.3 percent with effect from Thursday, state media said, following deep plunges in share prices.[25] SHANGHAI (AFP) — Chinese share prices opened up 7.98 percent Thursday, after the government cut the stamp duty on stock market transactions to boost the market, dealers said.[26] Share prices closed higher, gaining for the fourth straight session, as China stocks tracked a surge on mainland bourses after Beijing cut the stamp duty on stock market transactions.[27]

The Government reaped a windfall $27.5 billion from the rise in the stock transaction stamp duty last year -- about half of what China formally spends on defence. The reversal of this move, bringing the tax back down to 0.1 per cent from yesterday, was the second government measure this week aimed at restoring confidence in the share markets, which had lost about half their overall capitalisation in six months.[10] The government announced late on Wednesday that it was cutting the stamp duty on share transactions from 0.3 per cent to 0.1 per cent, reversing a move it made last May when it was seeking to cool surging stock prices. The measure took effect on Thursday and had an immediate impact with gainers overwhelming losers by 880 to one and more than 350 stocks hitting their 10 per cent daily limits.[4]

The government had tripled the stamp tax on share dealings on May 30 last year, seeking to cool surging stock prices. Wednesdays rebound came amid a volatile week that took the Shanghai index to its lowest level in more than a year on Tuesday.[28] Uncertainties over the American economy _ a vital export market _ are taking a toll. Stock prices sank to their lowest level in more than a year. The Shanghai index was trading at 3,244.86 _ down nearly half from its peak. Investors accustomed to China's command control economy are waiting for signs of government support for their ailing markets, but experts say they don't foresee a recovery any time soon.[9]

China's stock market has rallied since mid-2005 as the government converted mostly state-held non-tradable shares into common stock that can be bought and sold on the exchange. A government move to encourage bigger and more profitable state-run companies, such as Industrial & Commercial Bank of China Ltd. and China Life Insurance Co., to list on domestic stock markets also fuelled the rally. The CSI 300 Index, which tracks shares in both Shanghai and Shenzhen, retreated 3.3 percent to 3,159.72 today. The gauge, which surged 478 percent through 2006 and 2007, has fallen 41 percent this year.[16] Asian stock markets generally declined today, dragged down by resource companies, although Hong Kong's Hang Seng Index, where many Chinese stocks are traded, climbed 1.5%. In recent months, the Shanghai and Shenzhen markets had fallen more steeply than others, weighed down by concerns of soaring inflation, tightened credit, the U.S. sub-prime mess and, most significantly, a flood of once-non-tradable shares into the market after a ban on those sales was voided by government.[7] Millions of ordinary Chinese jumped into the stock market in the last couple of years with wide-eye expectations of raking in big profits. Since fall Chinese stocks have been tumbling, a reflection of rising inflation, a tightening of credit and, most significantly, a flood of once-non-tradable shares into the market after a ban on those sales was voided by government.[15]

Some also expressed worries that the government-orchestrated rebound will lead to another bubble. It may reverse the official efforts to shake off the stigma of a policy market, whereby investors make guesses about potential government moves, rather than study the economic and corporate fundamentals. The new tax move came after the country's stock market fell nearly 50 percent from its peak since mid-October due to a mixture of factors, including the overvaluation of shares, tight monetary policies, and concerns over the economy and corporate earnings due to a global economic slowdown.[18] The source of the concern is a class of stock originally called state shares that once represented government control. Those shares, which historically were kept off the market, account for almost three-quarters of the total market capitalization of an average company. Since 2005, a government overhaul has made most state shares technically tradable, but in reality few of them have actually moved into the market because of multiyear lockup periods agreed to as part of the overhaul. Those lockups are ending, a factor that has accelerated the decline in share prices that began last year when investors started to worry that a two-year rally that had driven prices up sixfold had put valuations too high at a time when the global economy was weakening.[6] Now the market is on the brink of a collapse.'' For most of last year, bank lobbies were crammed with savers waiting to shift their nest eggs into stock trading accounts. Many said they believed the government would not let share prices fall in the run-up to the Olympic Games, which begin Aug 8 in Beijing. "I'm convinced that we individual investors have been sacrificed,'' said Maggie Shen, who quit her job as a flight attendent to become a day trader last October, just as the market was hitting its peak. She read the daily financial newspapers, watched stock programs on TV and tried to learn as much as possible.[9]

Investors look over information at a stock exchange at a stock trading hall in Beijing, April 18, 2008. The policy change, which slashed the stamp tax from 0.3 percent to 0.1 percent effective immediately, was announced two days after the benchmark index had fallen to half its peak of October 2007.[12] The long-rumoured stamp tax cut will take effect on April 24. Investors have been pushing for such a move, with the country's benchmark index.SSEC down about 50 percent from its peak last October. The cut returns the stamp tax to its level last May, when the government raised it to cool the market, which had been surging in a two-year bull run that ultimately boosted the key index nearly six-fold.[29]

Last May, the tax was raised from 0.1 percent to 0.3 percent to dampen surging investor sentiment, but the Shanghai index rose to 6,124 points in October - about six-fold the valuation two years earlier. The ensuing six-month correction pushed the index below the 3000 level this week, prompting the move by the government to prevent further declines, analysts said.[30] The stamp tax cut stemmed panic selling and would push the market back on the track of stable development, said Galaxy Securities analyst Li Feng. The Shanghai index rose 4.15 percent to 3,278.33 on Wednesday before the tax cut announcement but still 37.7 percent lower than the beginning of this year and 46 percent off its peak on Oct.16.[23]

SHANGHAI, China -- China's most-watched stock index surged 9.3 percent Thursday _ its biggest percentage gain in more than six years _ after the government cut a tax on stock transactions in an effort to boost slumping markets.[31] SHANGHAI'S key stock index soared more than nine percent today after the government cut the tax on stock trading as it seeks to end a bearish run that had seen the key index slump by half in sixth months.[32] Analysts said the trading tax cut is likely to end a six-month bear market and could boost Chinese stocks by more than 20 percent in the next few weeks. 0303 GMT - Straits Times Index up 0.86 per cent.[33] Beijing - Shanghai stocks jumped more than 9 per cent Thursday, their biggest gain in more than six years, after the government cut the tax on equity trading, Xinhua news agency reported.[34] The Chinese government announced Wednesday it would cut the share trading stamp tax from 0.3 per cent to 0.1 per cent to boost the equities market.[34] The Chinese government announced on Wednesday it was to cut the share trading stamp tax from 0.3 percent to 0.1 percent from Thursday in an effort to boost the equities market.[23]

The stamp tax on stock trading was cut to 0.1 percent from the current 0.3 percent starting from Thursday, the China Central Television (CCTV) reported wednesday night.[5] China's stock market jumped eight percent on Thursday after an overnight cut in the stamp tax on stock trading.[5] The stamp tax on share trading will be cut steeply from today, the authorities announced Wednesday - in what is seen as an attempt to prevent the fragile stock market from a further slump.[30] The decision to cut the tax was approved by the State Council, or Cabinet, Xinhua news agency reported late Wednesday. It is the second major step to boost share prices announced by the Chinese authorities this week, signalling concern about the fate of the stock market, where millions of Chinese have invested some of their savings.[25] "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. The stamp tax cut is exactly that trigger," she said.[25]

The Shanghai Composite Index rose 9.3%, or 304.7 points, to close at 3,583.0 after tax was cut from 0.3% to 0.1%. It is a clear sign that the government wants to support share prices, which had fallen 50% from their peak levels in October 2007.[35] SHANGHAI: China's main stock index surged over 3 percent on Wednesday, led by financials and oil firms, as the market bounced from technical support and fund managers said regulators had asked some funds not to dump shares. The Shanghai Composite Index fell as much as 1.84 percent in early trade but was up 3.08 percent at 3,244.856 points at midday, less than 4 points from its intra-day high.[36] The move, announced Xinhua news agency, comes as stocks languish around 46 percent below an all-time high reached last October, with the key Shanghai Composite Index recently skirting the 3,000-point level. "This is definitely good news for stocks. Of all the measures that were expected by the market, this one is the strongest they could have picked," said Yan Li, an analyst with Southwest Securities.[25] The benchmark Shanghai Composite Index climbed as much as 7 percent to 3,305 yesterday after the securities watchdog's move late Sunday to limit mega share sales on the open market.[19] The Shenzhen Composite Index fell 0.6 percent to 915.74. "It looks like a short-term technical rebound, since 3,000 points is a psychological benchmark," said Zhai Peng, a strategist at Guotai Junan Securities, in Shanghai. "I dont think it will be sustainable," he said of the late rally.[37] After hearing the long-awaited news, investors went on a buying spree, pushing the benchmark Shanghai Composite Index (SCI) to open 7.98 percent higher at 3,539 points.[18] The benchmark Shanghai Composite Index ended the morning trading 239.07 points higher at 3517.40 after surging by 9.6 percent, near the daily limit of 10 percent, to the highest position of 3593.20 before 10:30 a.m.[23] The benchmark Shanghai Composite Index surged as much as 9.6 percent in early trading, then fell back some before closing up 304.69 points, or 9.3 percent, at 3,583.02.[17] The benchmark Shanghai Composite Index rose 8.5 percent to 3,559.95 in early trading Thursday.[38]

Today Shanghai Composite Index was up more than 10% as Chinese authorities has cut tax on trading on stocks from 0.3% to 0.1%.[39] Any further delays in the tax cut could have triggered heavy losses and if made later could have been less effective, Qiu said, pointing to the fall in the Shanghai Composite Index to below 3,000 points in Tuesday trade before closing at 3,147.79. "Three thousand points is an important threshold for both regulator and investors, and a sustained decline below the mark could be disastrous to investor confidence and trigger further selling."[11]

The Shanghai Composite Index, which covers A and B shares, closed up 130.54 points or 4.15 percent at 3,278.33 on turnover of 86.1 billion yuan (12.3 billion dollars).[25] Turnover in Shanghai A shares was moderate at 40.3 billion yuan but was up from Tuesday morning's 25.48 billion. On Tuesday the index dipped below 3,000 points for the first time in 13 months, nearing major chart support at 2,956, the 61.8 percent retracement of its bull run from mid-2005.[36]

The Shanghai index was helped Thursday by a 9.9 percent advance in PetroChinas stock, to 18.15 yuan. Its shares account for about one-fifth of the benchmarks total value.[24] The Shanghai index was helped Thursday by a 7.1 percent advance in PetroChina's stock, to 17.70 yuan. Its shares account for about one-fifth of the benchmark's total value. At least 200 companies' shares had hit the 10 percent daily upside limit by late morning, according to figures compiled by market monitor Wind Consulting Co.[17]

The CSI 300 Index, which tracks yuan- denominated shares in Shanghai and Shenzhen, surged almost sixfold in the two years through 2007. The three-year-old index climbed 9.3 percent to 3,774.50 at the close in Shanghai, with all of its 10 industry groups rising. The gauge tumbled as much as 39 percent this year, making it the second-worst performing benchmark in the world after Vietnam.[1] In the second trading session since regulators moved to cool investor concerns by limiting big share sales, the benchmark Shanghai Composite managed to climb 1%, to end Tuesday at 3147.79. The index is still down 40% since the beginning of the year and has declined 49% since its mid-October record of 6124.04.[40] BEIJING (XFN-ASIA) - China A-shares finished the morning lower amid weak investor confidence as the market lost momentum late yesterday after an early surge driven by a policy announcement, dealers said. The benchmark index gave up most of its gains towards the close yesterday after posting strong early gains on news of restrictions on sale of listed-company shares coming out of lock-ups.[41]

The Shanghai index had lost nearly 50 percent by last week's close from last October's peak level, amid concern of rising inflation, economic slowdown and a heavy supply of new shares. The index has regained some ground this week after the government said over the weekend it's tightening sales of newly-freed previously non-tradable shares to avoid a huge influx of new equities onto the exchanges.[32] By signalling that authorities want to help the market, where the main Shanghai index, SSEC, plunged 51per cent from October's record peak to Tuesday's 13-month low of 2,990.788 points, the tax cut is expected to trigger a surge of money back into shares. "This reflects the attitude of the central government.[21] A 38.2per cent retracement of the index's tumble from mid-January - a reasonable expectation at the end of a downtrend - would reach the 4000 point area, technical analysis showed. Mr Li Xianming, a strategist at Ping An Securities, said many stocks would open on Thursday up by their 10per cent daily limits. He thought the index might rise to at least 4500 points. He noted that the tax cut followed the securities regulator's decision at the weekend to place restrictions on large sales of shares freed up by the expiry of lock-up periods.[21] The Government is worried that a further stock market slide could trigger a chain reaction, including social unrest and damage to the real economy," said Mr Zhang Yang, a strategist at Orient Securities. "The policy change will boost market confidence, attract fresh capital and trigger a rally that will hit at least 4000 points," he added. Mr Huang Yan, a fund manager at Guotai Fund Management, agreed that the index would target 4000 points, after which its direction would depend on the health of the economy, he said. "The tax cut sends a very clear signal that the Government wants to create a floor around 3000 points," he said.[21] "The Government is apparently using a combination of measures to prevent the index from falling below 3000, and in a careful sequence. Perhaps it has more cards up its sleeve," he said. Despite the euphoria, some analysts worried the tax cut could hurt the long-term growth of China's stock market, hindering its development into a stable source of corporate funding where prices were decided by market forces rather than official fiat.[21] Instead of trying to sell a large quantity of stock onto the market, sellers will be required to offer the equity in blocks on a separate trading venue that permits price negotiation, and therefore doesn't directly affect intraday trading on the main exchange. Other limits will apply. "It is a positive message sent by the government. It is impossible for the stock market to rebound just because of this measure," says Zhang Gang, a strategist at Central China Securities Co. in Shanghai. Monday the market was already jittery about having lost half its value in just months, and about seeing its biggest stock, PetroChina Co., slip below its initial-public-offering price last week.[6] Government attempts to manage stock market prices in China do work, for a while at least. Since its peak in October, however, the market has plummeted to just below 3000 on Tuesday, losing over half its value, and creating a great deal of concern for the government ''' China'''s is the world'''s worst performing stock market year to date. The government is afraid both that the continued market slump may anger the newly-emerging urban middle classes and that it may translate into reduced consumption as savings are eroded (although according to Andy Rothman at CLSA at its peak the total market cap of traded shares was only about 36% of GDP, and is much less today). This was not the government'''s first move to try to kick-start a rally. On Sunday night, as I discussed in my Monday entry, the CSRC announced restrictions on the ability of owners of previously locked-up shares to sell their shares in the market. This was designed to address fears of a selling overhang, and although it couldn'''t have had much fundamental effect as far as I can see, it was transparently a signal that the government wanted the market to trade up.[42]

SHANGHAI, China -- Beijing's apparent failure to boost its sagging stock market means it could turn to more-drastic measures to lift share prices before the Summer Olympics, analysts say.[40] Share prices closed higher as China stocks gained momentum in late trade after a recovery in Shanghai, with oil and financials leading the way.[43]

The China Securities Regulatory Commission (CSRC) said on Sunday it would encourage block trading for bulk sale of shares freed from the lock-up period. It specified the procedures of the operation on Thursday, saying selling the formerly locked shares on the bidding market would receive real-time monitoring. Investors have long complained that the huge amount of such shares would flood the market and therefore sink share prices.[23] The CSRC had also punished two fund managers for insider trading. The China Securities Regulatory Commission said the fund managers, Tang Jian and Wang Limin, bought shares before their funds bought into them, selling them later at a profit when the price subsequently rose, a practice known as front running.[23] Losses by 346 mutual funds, which many people use as investment vehicles, reached 647.5 billion yuan (US$93 billion) in the first quarter, eight times the amount of the three months ended December, according to TX Investment Consulting. "If such shares were all traded on the bid trading system, trading would not be efficient as the volume would be restricted by the buying interest on the secondary market," a China Securities Regulatory Commission spokesman said in a statement.[11]

The bounce followed news late Sunday that the China Securities Regulatory Commission would require anyone selling more than 1% of a company's total shares within one month to do so outside the regular stock market, on a venue for block trades.[6] The move will address concerns over a flood of shares coming into the secondary market, which could "put constant pressure on stock prices and distort the price formation mechanism," the China Securities Regulatory Commission said.[12]

The charts suggest an extended recovery might test the 4,000-point area, the 38.2 percent retracement of the market's slide from mid-January. Two fund managers, who declined to be identified, said the China Securities Regulatory Commission had again asked some fund management firms not to cut their equities holdings. This fuelled talk that the index might finally be finding a bottom around 3,000 points, as any clean break below that level would trigger further action by regulators to rescue the market.[36] With the index down nearly 50 percent from last October's peak, and the average premium of domestically listed A shares over Hong Kong-listed H shares in Chinese companies down to near 30 percent, many analysts said blue-chip valuations made a market rebound possible. With consumer price inflation near 11-year highs and a possible economic slowdown looming in the second half of this year, they said it remained unclear whether the market was starting any extended recovery. "It's natural for the market to rebound near 3,000 points, which many see as a psychologically important level," said Gao Lingzhi, strategist at Great Wall Securities.[36] The Shenzhen Composite Index lost 5.4 percent to 872.34. The slump in equities has made the country's stock market the world's second-worst performer this year, as inflation stayed close to an 11-year high.[16] The Shenzhen Composite Index, which tracks stocks listed in the smaller of China's two exchanges, rose 8.7 percent to 1,043.8.[1] The Shanghai Composite Index, which covers all the 862 companies on the bigger of China's two stock exchanges, dropped 3.9 percent to 2,994.173 as of 1:51 p.m. local time.[16] The drop has left the index valued at 21 times estimated earnings, down from 46 times on Oct. 16, when the CSI 300 closed at a record. The Chinese gauge is still more expensive than the MSCI Asia Pacific Index and the U.S. Standard & Poor's 500 Index, which both trade at about 15 times profit. The 17-year-old Shanghai Composite Index surged 304.7 points to 3,583.03, with just one of its 888 stocks declining.[1] Over a six month period, the Shanghai Composite Index has seen a fall of 51.16%, from the peak of 6124.04 points to a nadir of 2990.79. PetroChina, accounting for 20% of the weight of Shanghai Composite Index, fell through its IPO price within months after its listing on the A-share market. Such a decline, one that parallels the crashes of the Dow-Jones Index in 1929, the Nikkei Index in 1989, and the NASDAQ Index during the first wave of the dotcom bubble burst in 2000 after it had reached an historical high, is not common among the stock markets of the world.[14] The benchmark Shanghai Composite Index rose 130.54 points to close at 3278.33, with 840 out of 913 stocks closing higher.[44] The benchmark Shanghai Composite Index (SCI) tumbled more than four percent on Tuesday to fall below 3,000 points, the lowest level in 13 months, before rallying to positive territory.[5] The benchmark Shanghai Composite Index, which covers A and B shares, opened up 261.54 points at 3,539.87.[26]

China's main share index, the Shanghai Composite Index, is trading 50% below the peak level reached in October 2007. It ended the morning session at 3,022.6, which is 3% down on the day and less than half of its record close of 6,092.1, set on 16 October.[45] Investors remained unconvinced, and on Tuesday the Shanghai index sank below 3000. In order to boost the insurance sector in particular, the China Insurance Regulatory Commission announced on Wednesday that it would seek the approval of the State Council, China's Cabinet, to let insurance companies invest more in property and infrastructure projects, and thus reduce their exposure to the softening share market.[10]

SHANGHAI, China - China's most-watched stock index rose modestly Monday, giving up early sharp gains, on news that the market watchdog has implemented a new policy for shares freed from lock-up limits.[20] SHANGHAI (XFN-ASIA) - A decision by China to slash a stock transaction tax by two thirds sent shares soaring but analysts warned more policies are needed if the jittery market is to be properly stabilized.[8] The Shanghai stock market is up more than 8 percent after the Chinese government cut a tax on stock transactions.[38] A-shares closed sharply higher after the government cut the stamp duty on stock market transactions to 0.1 pct from 0.3 pct. The long-expected move, effective today, came after Chinese markets had fallen 45 pct from their peak last October.[27]

China last adjusted the stamp duty tax in May 2007, when it hiked it from 0.1 percent to 0.3 percent. The Chinese stock market at the time was experiencing the fiercest bull run in its history, but reacted by plunging 6.5 percent -- reflecting how important changes to the tax can be for investor psychology.[25] According to today'''s South China Morning Post '''internet chat rooms carried messages praising government officials believed to be responsible for the tax cut.''' This is pretty typical of how most investors view the change in the stamp tax. It has no real fundamental effect but it signals government intentions, and in China the main driver of the stock market is still perceptions of government intentions. This is definitely not a good thing.[42] The stamp tax cut would not fundamentally change the operation of China's stock market but only render short-term fluctuations, said Guosen Securities analyst Lin Songli.[23]

Li and other analysts agreed that the market will recover from the prolonged correction after the latest move, although other key reforms are needed to ensure the sound, long-term development of the market. The stock market is still faced with key challenges, such as the IPO system, which favors big institutions instead of individual investors, and unrestrained re-financing by listed companies, said Yang Tao, economist with the Institute of Finance and Banking at the Chinese Academy of Social Sciences. The initial 160 billion yuan ($22.9 billion) re-financing plan by Ping An Insurance of China earlier this year, for example, triggered a selling spree amid investor fears the market may become a cash cow for big companies.[30] The steep declines in stocks has set off calls from the public for the government to do more to shore up the market -- calls that have also been reflected in commentary by the state media. "Policymakers should pay attention to such calls, but not respond out of merely immediate concerns," the China Daily said in an editorial on Tuesday. "The more important job for them is to work out long-term measures that underpin a healthy development of the stock market." The State Council called early his month for government bodies to raise the quality of listed companies and maintain an open, fair and just market order, according to a State Council statement summarising working priorities for this year. The statement was short on detail and was meant mainly as a signal to investors that their plight was not being ignored, analysts said then.[25]

The mainland stock market jumped 4.15 percent yesterday with investors expecting more market-friendly moves from the government following the release of block trading rules on Sunday.[44] Today investors cheered officials for rolling back the tax. "Government should have done this long ago," said a retired Shanghai food plant worker who gave his last name as Huang. "Of course I'm very happy today," said the short, gray-haired man, who began playing the stock market in May 2007 and has lost about 40% of his initial $13,000 investment.[7]

BEIJING (XFN-ASIA) - The Shanghai Stock Exchange and Shenzhen Stock Exchange said they have jointly issued guidelines on the sale of shares coming out of lockup periods. The guidelines require investors planning to sell 1.5 mln shares or more to execute block trades, provided their individual transactions do not exceed 1 pct of shares outstanding.[46] China stocks endured a mixed day yesterday as investors remained skeptical of the industry watchdog's decision to limit share sales, indicating rescue measures are still expected to strengthen weakened market confidence.[19]

The action was targeted particularly at shareholders holding large amount of stocks under lock-up periods that are coming up for expiry. Such lock-up periods are often imposed on strategic investors holding shares in companies when they are listed. Analysts said that measure was aimed at easing concerns that large amounts of such shares would flood the market and sink prices further.[11] Share prices closed slightly lower as technology stocks remained weak ahead of first-quarter earnings reports from heavyweights Taiwan Semiconductor Manufacturing Co (nyse: TSM - news - people ) and United Microelectronics Corp. The market opened firmer following gains on Wall Street overnight but lost steam as investors played safe ahead of results announcements due next week.[27] "The trading would also exert huge pressure on share prices and twist the pricing mechanism. "The move will help ease pressure on the secondary market. and to stabilize investors expectations on the reduction of the holdings of such shares." Li Feng, an analyst at Galaxy Securities, said a sustained market rebound was expected this quarter on low valuations, easier liquidity, and first-quarter earning results that should show a minimum of 30% profit growth.[11] Analysts and academics, including Cao Fengqi, head of Peking University's finance and securities research center, said a prolonged fall in share prices would hurt consumer spending, an increasingly important driver behind the country's economy as exports growth slows on signs of a U.S. recession.[11] Analysts said that Chinese share prices were often more dependent on government measures than the state of the economy.[35]

A separate concern is associated with the potential impact of an avalanche of previously non-tradable shares being freed up and flowing into the market. It is the second major step to boost share prices announced by the Chinese authorities this week, signalling official concern about the fate of the stock market, where millions of Chinese have invested some of their savings.[26] The stock market is also disturbed by the lack of supervisory transparency and the snail's pace of investigation and dealing with insider tradings. The CSRC has just dealt with two fund managers' front running, i.e. buying into a client's deal before completing it for the client and profiting from the rise in share price, but that was nearly two months after their illegal operation.[14]

Four days before the adjustment of the stamp tax, the CSRC announced regulations covering the trading of the former non-tradable shares. That problem along with the high stamp tax and the huge refinancing issue plans of several blue chips have hung around the neck of the market like an albatross and are regarded as the most major causes of this round's stock crash.[14] The reduction of stamp tax on share trading from 0.3 percent to 0.1 percent was announced after the market closed yesterday.[44] On Wednesday evening, the government fulfilled investors expectations, cutting a stamp tax on share transactions to 0.1 percent from the current 0.3 percent.[28]

The government cut the stamp duty on stock transactions to 0.1 percent from 0.3 percent, effective today, the government announced yesterday after the market closed.[32] The stamp duty on stock trading was reduced to 0.1 percent from 0.3 percent effective today, the government said after the close of trading yesterday, the latest in a series of measures to revive stocks.[1] The stamp tax on stock trading was slashed to 0.1 percent from 0.3 percent starting from Thursday, following a 50 percent plunge in the country's equity market in less than six months.[18]

First and foremost, China saw a rally in Shanghai by more than 9% on the local markets after the Chinese lowered a stock trading tax from 0.3% down to 0.1%. MarketWatch noted that this was meant to take some air out of its market last year after major surges had been seen. After the Shanghai market had fallen by 50% from highs, they probably decided to keep confidence from eroding further and declare "mission accomplished." The second issue is that China's sovereign wealth fund, The China Investment Corporation, has kicked up the amount it can invest in entities and assets abroad.[47] SHANGHAI: Retiree Guan Yuhuai plunged into stock trading for the very first time when prices were beginning to soar two years ago. Within a month, he doubled his investment, and he was hooked. With the market's recent plunge to half its October all-time high, Guan and millions of other Chinese investors are getting a rude introduction to the downside of capital markets. "I thought I was pretty smart and bold to be good at stock trading,'' says Guan, a vigorous former steel engineer who seems a bit baffled by his reversal of fortune.[9]

The Shanghai index rises 9.3% after Beijing cuts stock transaction tax. It's the biggest daily gain in 7 years.[7] Chinese shares have soared after the government cut a tax on stock transactions in a move widely seen as a signal of support for the markets.[48] That's what investors are wondering after the central government on Wednesday cut its stock transaction tax to 0.1% from 0.3%.[15]

The tax cut was announced on a daily national newscast by state-owned China Central Television last night in a country where individual investors have opened about 140 million accounts to trade stocks and mutual funds.[1]

Last night the Ministry of Finance and the State Administration of Taxation announced that the stamp tax on the purchase and sale of stocks would be cut from 0.3% to 0.1%.[42]

The tax cut came on the heels of a separate government measure on Sunday to limit sales of large blocks of shares to off-market transactions.[15] China's main share index has seen one of its biggest daily gains after the government cut taxes on share trading.[35] SINGAPORE: Shares of Singapore-listed Chinese firms or S-shares surged after a share trading tax cut in China, dealers said.[33]

"The tax cut will help extend the recent rebound in the market, but how much the rebound could be is up to whether the government will take further measures to tackle heavy new equity supplies," said CITIC China Securities analyst Zhang Xiaojun.[32] "The cut in stamp duty tax expressed the government's stance to support the market, but it did not eradicate the risks," said Chen Weiqing, a Beijing-based analyst with CITIC Securities. He said the risks included turmoil in overseas markets and concerns over a slowdown in the domestic economy.[26] The long-awaited tax cut is a clear signal of the government's determination to bolster the fragile market, said Wang Junqing, analyst with Guosen Securities. Market sentiment was likely to recover with lower transaction costs, he said.[2]

'(The measures) definitely indicate that the government wants to rescue the domestic stock markets following recent plunges,' said Zhang Gang, an analyst at Central China Securities.[8] The government at the weekend said shareholders selling more than 1 percent of a stock within a month must do so in single trades, which would keep the transactions off the open market and support equity valuations. "The bubble's popped,'' said Fraser Howie, co-author of the book "Privatizing China: The Stock Markets and Their Role in Corporate Reform,'' in Singapore. "This is a major rout and there's nothing to stop the market going down another 10, 20, 30 percent.''[16]

The government stepped in to revive the stock market two days after the benchmark index sank to less than 50 per cent of its October 2007 peak.[34] Shanghai's benchmark index was up 9.29 per cent and Shenzhen's 9.59 per cent, after the Finance Ministry announced it was reducing the tax from 0.3 per cent to 0.1 per cent.[10]

The FTSE China Index rose as much as 5 percent to 516.51 points. The index has fallen 32 percent so far this year. Large cap firms such as rig-builders Cosco Corp and Yangzijiang rose as much as 5.4 and 9.8 per cent each.[33] The Shanghai bourse had soared more than six-fold between June 2005 and last October's record peak. It then plunged 51 per cent reaching a 13-month low on Tuesday of 2,990.788 points, hit by rising inflation, the threat of an economic slowdown this year, and a large amount of previously non-traded shares.[4]

Shares of Yanlord Land rose as much as 9.1 per cent to S$2.63 with over 2.4 million shares traded on bargain hunting of stocks that are trading below net asset value.[33] The Shanghai index had briefly dipped below 3,000 on Tuesday -- from a record high of 6,092 in mid-October -- before closing up 1% that day. Dai says he won't be rushing to plow more money into stocks just yet. "I want to wait and see," said the clerk at a trading company, who has lost about $43,000 in recent months, leaving him with about $85,000 in his stock portfolio.[15] About this time last year, the Shanghai stock exchange composite index crossed 4000 for the first time.[42] The smaller Shenzhen composite index, China's other stock exchange, also rose sharply today, up 8.7% to close at 1,044.[7] The Shenzhen Composite Index, which tracks China's smaller stock exchange, jumped 8.7% to 1,043.80.[49]

The Shenzhen Composite Index of China's smaller, second market fell 1 percent to 921.72.[20]

The Shanghai Composite Index, which tracks yuan-denominated A shares and hard-currency B shares, jumped 9.29 percent to 3,583.03 at the 3:00pm close.[32] The benchmark Shanghai Composite Index has plunged nearly 50 percent since last October despite a rebound Wednesday before the announcement.[30] The benchmark Shanghai Composite Index surged as much as 9.6% to 3,593.2 as investors resumed buying after weeks of holding back in hopes of market boosting news.[48] The benchmark Shanghai Composite Index rebounded in late trade, closing up 30.82 points or 0.99 pct at 3,147.79.[43] The Shanghai Composite Index gained 0.7 percent, or 22.30 points, to 3,116.98 by the close, after surging 6.8 percent early in the session.[20] The Shanghai Composite index surged 9.29 per cent to end at 3,583.03 points.[34] The Shenzhen Composite index gained 8.7 per cent to close at 1,043.80 points.[34]

The index surged as much as 9.6 per cent to 3,593.2 in morning trade as investors resumed buying after weeks of holding back in hopes of market-boosting news.[4]

The Shenzhen Component Index added 5.45 percent to 11,784.15. After the key index returned above the psychological 3,000-point mark from the previous trading day, investors' confidence grew and they started to hunt for bargains, a Shiji Investment analyst said.[13] The long-expected concrete support measure has boosted investors' confidence. Many analysts also believe, the news might not be as good as they expected to change the trading tax from two to one-way, but it's definitely the strongest boost to weak investor sentiment in recent days.[3]

The government tripled the stamp duty last May in an attempt to cool a rally that was drawing more than 300,000 new investors a day to stocks.[1] The government cut the stamp duty on stock transactions to 0.1% from 0.3%, effective today.[49] Beijing late Wednesday, apparently concerned about the growing risk of social unrest because of the market's plunge in recent months, cut the stock transaction tax to 0.1% from 0.3%.[7] SHANGHAI -- With its stock market down by about half since its peak, authorities in Beijing rolled back a year-old tax increase on stock transactions.[50] CHINESE stock markets leapt yesterday in response to the slashing of the tax on share transactions.[10]

The Chinese stock market now still lacks a shorting mechanism, and there is still no timetable for the launch of stock index futures, in the planning now for two years.[14] The feelings of people like Wu suggest any continued rally by China's stock market will not be as fevered or extend nearly as far as last year's bull run, analysts said.[22] Just as important as any measure aimed directly at the stock market are broader policies adopted by the policy makers to regulate the overall economy, according to analysts. Specifically, China is struggling with inflation, currently near 12-year highs, and policies aimed to rein in prices would eventually hit the stock markets, they argued.[8] Speculation that government measures to stem inflation will dent corporate profits has erased about $1.9 trillion in market value from China's stock market since January.[16] Government support measures may fail to stem the declines that dragged the value of China's stock market down to $3.03 trillion yesterday from a record $4.75 trillion on Jan. 14.[1]

Citic Securities Co., China's biggest brokerage, gained on speculation the stock market rally will boost trading income.[1] BEIJING (XFN-ASIA) - A summary of Greater China stock market trading Tuesday.[43]

As a result the rise of insurance stocks, including the largest, China Life, and Ping An, the second largest, exceeded that of most of the rest of the resurgent market yesterday. The overall rise yesterday -- almost 10 per cent -- underlined the volatility of the Chinese markets, their dependence on government policies and regulations, and their renewed confidence that the succession of positive government announcements demonstrates Beijing's determination to put a floor under stocks, and to revitalise the markets following six bearish months.[10]

BEIJING, April 23 (Reuters) - China has cut its stock-trading tax to 0.1 percent from 0.3 percent, the government said on Wednesday, aiming to bolster the country's markets which have been in freefall for three months.[29] The decision to cut the tax to 0.1 percent from 0.3 percent was approved by the State Council, or cabinet, Xinhua news agency reported late Wednesday.[26]

The tax move came 11 months after the trading cost was tripled to 0.3 percent to take the steam out of a spectacular bull run that saw the SCI more than quadrupled in less than two years. On Wednesday at its executive meeting, the State Council deliberated and approved in principle two securities-related draft regulations to promote the healthy and stable development of the equity market -- 0ne about supervision of securities companies and another about risks disposition of securities companies.[5] The Ministry of Finance and the State Administration of Tax slashed investors''' trading cost to 0.1 percent from 0.3 percent starting from Thursday in the latest official attempt to revive the market.[5]

The reduction in the stamp tax followed new trading rules announced during the weekend that ordered the selling of a large amount of shares be conducted on a bloc trading system. [18] According to the Shanghai Securities News, the guidelines allow the placement and public sale of shares in smaller quantities, but the exchanges recommend the block trading process otherwise.[46] When more than 1 percent of a listed firm's total shares are sold within a month, the trade should be conducted through a separate block trading system operated by the Shanghai and Shenzhen exchanges, the CSRC said.[23]

Jittery investors are also well aware that the rule on block trades of newly released shares can easily be skirted by selling more but smaller blocks of shares, said Stephen Green, an economist for Standard Chartered Bank in Shanghai. With inflation running at over 8 percent, authorities are unlikely to relax monetary policy _ the one thing that might actually rekindle buying sentiment, he says.[9] Rules keeping China's share markets generally off-limits to foreign investors have insulated the mainland's two markets in Shanghai and Shenzhen from direct shocks due to the U.S. credit crisis.[9]

More than half of the 20 largest-capitalized shares rose by the daily limit of 10 percent on Thursday, including Sinopec, the country's biggest refiner; China Life, the biggest life insurer, and steel maker Baosteel. Brokerage shares led the gains, with investors expecting that these firms would benefit from an overall market rebound.[12] Jing Ulrich, chairman of JPMorgan Securities China Equities, was quoted as saying on Tuesday that international investors have begun to show interest in A shares.[44] The China Securities Regulatory Commission announced restrictions on sales of certain shares.[45] The guidelines follow yesterday's announcement by the China Securities Regulatory Commission (CSRC) of plans to restrict shares coming out of lockup, as a means of regulating the flow of shares coming onto the market.[46]

Wang has long been regarded as a troubleshooter in China 's trouble-ridden financial market. During his term as vice-governor of Guangdong Province, he dealt with China 's first bankruptcy of a state-owned financial institute, the infamous GITIC case. After serving as Mayor of Beijing for five years, this year he was appointed one of China 's four new Vice Premiers, with a portfolio over financial and foreign trade policies. During his first month as Vice Premier, Wang conducted investigations of the PBoC, the China Securities Regulatory Commission (CSRC) and other departments under his supervision, but raised no suggestions.[14]

"Market sentiment still needs more time to recover," said Zhang Xiuqi, an analyst at Guotai Junan Securities. "The more market-boosting policies, the more confidence," he added. Major refiner China Petroleum & Chemical Corp., or Sinopec, sank 5 percent to 9.91 yuan after announcing that its net profit probably fell more than 50 percent in the first quarter from a year earlier, due to increasing costs. Both Sinopec and PetroChina _ China's two biggest state-controled oil companies _ announced Monday that they would receive unspecified "appropriate" monthly subsidies for losses, retroactive to April 1.[20] Yan Ji, investment director at Jintrust Fund Management, said that the average price/earnings to growth (PEG) of A shares is now below 1, regarded by analysts as a reasonable level. The current PEG is 0.66, calculated on the basis of the current 2008 average PE ratio of around 20 times and the projected 30 percent corporate earnings growth this year.[44] Straits Times Index up 1.16 percent. Contract electronics firm Venture Corp fell as much as 3.4 percent to S$11.32 after the company an unexpected drop in its first-quarter earnings. Venture, Singapore's second-largest contract electronics maker, said its net profit fell 20 percent, due to slower orders, a weak U.S. dollar and losses in its investment portfolio. For more details, double-click Credit Suisse kept its investment rating for Venture at "outperform" with a share price target of S$13.70, citing net profit in line with its estimates, despite collateralised debt obligation provisions.[33] China's share prices have plunged since the benchmark index reached a high in October.[6]

Aggregate turnover boomed to 175.9 billion yuan (about 25 billion U.S. dollars) from a daily total of 120 billion yuan on Wednesday. Real estate, construction and metal sectors led the rebound, with their share price indices jumping more than 8 percent.[23] The share prices of at least 550 companies rose the 10 percent daily upside limit, according to figures compiled by market monitor Wind Consulting Co.[24]

PetroChina, the heaviest weighted component of the Shanghai index, surged 3.19 percent to 16.52 yuan, while shares of the other oil giant, Sinopec, were up 6.46 percent.[13] The Shanghai index opened 261.54 points, or 7.98 percent, higher at 3539.87 points on Thursday.[23] Shortly after the opening of trade Thursday, the Shanghai A-share Index was up 274.22 points or 7.97 percent to 3,714.06.[26]

The Shanghai A-share Index rose 319.76 points or 9.30 pct to 3,759.61, while the Shenzhen A-share Index was up 87.98 points or 8.74 pct at 1,094.48.[27]

The index also was showing signs of bottoming out even before the tax cut. Partly because of hopes for government aid, it closed up 4.15per cent at 3,278.330 points on Wednesday before the announcement, rebounding from near technical support at 2956 points, the 61.8per cent retracement of its bull run from 2005.[21] I observed that Chinese investors were too immature and too euphoric. Many of them had blind faith that the government wouldn't let the market fall before Olympic. Judging by their euphoric reaction to the stamp tax cut, I am afraid the correction has yet to run it course.[42] The tax cut, widely expected, was only the latest in a number of steps taken by the government to boost investor sentiment following months of heavy sell-offs. The stamp duty will still apply to both sides of a trade.[11]

Wednesday's tax cut showed the government's desire to see a stable market and would help to restore investor confidence, said Qiu Yanying, an analyst at TX Investment Consulting Co. "Confidence in a recovery is more important than fund injections.[11]

Investors' enthusiasm was stimulated by the long-expected tax cut, with gainers outnumbering losers by 785 to 2 in Shanghai and 626 to 1 in Shenzhen.[23]

Last May, when Beijing suddenly tripled the stock-trading tax, sending the Shanghai market tumbling by 15% over several days, angry investors chided the government for meddling and breaking up the party.[7]

BEIJING/SHANGHAI, April 24 (Reuters) - Chinese newspapers available in Beijing and Shanghai carried the following stories on Thursday. Reuters has not checked the stories and does not vouch for their accuracy. Respondents said their perception about French attitudes toward the Beijing Olympics had severely dented their impression of the country. As many as 60 percent of them said they had "a growing dislike for France". The government has earmarked 500 million yuan in scholarships for foreign students this year, up 40 percent from 2006.[51] '''Below 9 percent, it means the tightening is overdone and needs to be loosened,''' Zheng Jinping, the bureau's chief engineer, said at a seminar in Beijing today. '''China can't afford a sharp slowdown because it needs to create jobs, reduce poverty and continue with urbanization, he added. Zheng then said '''A reasonable combination for this year is 4.8 percent inflation and 9.7 percent GDP growth,''' adding that inflation might come in between 4.5% and 5.5%.[42]

The tax cut will not remove many major market worries. Inflation is at 11-year highs, economic growth may slow if the global environment worsens and huge volumes of new shares will come to the market this year and next as lock-up periods related to initial public offerings and state share reforms expire.[21] A newer source of supply overhang -- also very large -- involves stock that was purchased by institutional investors during a recent wave of initial public offerings that raised more money than IPOs in any other country over the past two years. Those shares were also subject to lockup periods on selling that are also now ending.[6] "I sold half my shares and mutual funds today. I only see this as a short-term rebound, not the start of an uptrend," a retiree in his 60s, who identified himself as Wu, said at a Shanghai Securities branch in the city's financial district. Wu said he had the equivalent of several thousand dollars of his savings in stocks, and would end up roughly breaking even on his investments. "A rally of several days isn't enough to compensate you for the pain of having the value of your stocks halved," he said.[22] The finance ministry raised the tax to 0.3per cent from 0.1per cent last May in order to curb wild speculation in stocks. The cut to its original level could prompt fresh speculation, requiring further official intervention down the road. "This means the market has degenerated into a policy-directed market once again," said Mr Zhang at Orient Securities.[21]

Perhaps just a lucky guess. No one doubted that this tax move represents fairly blatant signaling by the government. Today'''s Bloomberg quotes Wei Wei, an analyst at West China Securities Co, saying '''It's a clear signal from the government that it thinks of the decline as overdone.'''[42] Equity securities made up 23 percent of China Life's investment portfolio in 2007, and 25 percent of Ping An's. "The market has reached its bottom with the strong support from the government,'' said Chen Shide, who manages the equivalent of $2.3 billion at GF Fund Management Co. in Guangzhou.[1] According to a report out of the FT (and elsewhere), China'''s $200 Billion sovereign wealth fund now has about $90 Billion to purchase assets and entities. Initially it had about $66 Billion, but the government decided it would need less to restructure its Agricultural Bank of China, its China Development Bank and its other struggling state-owned financial institutions. It looks like the funds will mostly be given to external managers for foreign equities, fixed-income, and in alternative investments that pertain to private equity funds, hedge funds and possibly commodities.[47]

China at the end of last year tripled to US$30 billion the amount overseas institutions are allowed to invest in yuan-denominated stocks and bonds, then in February permitted the creation of new mutual funds, ending a five-month freeze.[11] HSBC China strategist Steven Sun refers to the stock due to hit markets after lockup periods as evidence of "unfinished business," and estimates that by the end of March some 3.2 trillion yuan, or $457.5 billion, were made newly tradable. That is equivalent to 40% of the value of freely floating equity in China. By 2010 this amount could hit 17 trillion yuan, Mr. Sun says.[6] China's largest steelmaker Baosteel jumped 6.61 percent while China Aluminum soared 6.1 percent after posting 1.17 billion yuan ($169 million) earnings in the first quarter.[44] Shandong Gold Mining Co., China's third-largest bullion producer, gained 9.79 yuan, or 8 percent, to 131.76. Both stocks climbed as they reported surges in first-quarter earnings.[1] Among other stocks that slumped today, Yunnan Chihong Zinc & Germanium Co., China's third-largest zinc producer, tumbled 3.42 yuan, or the 10 percent daily limit, to 30.74.[16]

In Chinas state-dominated economy, stock prices are especially sensitive to policy changes. "We need to follow the trend that authorities support," said another investor at the brokerage, who gave only his surname, Mei.[24] Analysts say that in China's state-dominated economy, stock prices are especially sensitive to policy changes and often are disconnected from the overall economy.[17]

Some analysts said that the premium was justified because China's economy is growing faster than others and that the steep decline in recent months had made Chinese shares more attractive today.[7] "Considering the need for further development of Chinese capital market, the government needs to do more to ensure stable growth of the broader economy," said Wei Daoke, analyst at Shenyin Wanguo Securities in Shanghai.[24] The block trading rule "certainly is a sign that the government wants to do something to keep the market from collapsing,'' said Qian Qiyun, an analyst at Shenyin & Wanguo Securities in Shanghai. He added, "I think they'll need to do more, though.[9] We don't have the information that many institutional investors have," said Liu Rongsheng, 62, a stationery store owner who was following the trading action at Guo Yuan Securities in central Shanghai.[7] The market rose today on the news after continuous slumps made investor sentiment extremely dim,' said Yang Ming, an analyst with Shanghai Securities.[8] Zhang, the Haitong Securities analyst, suggested it would take a long time before the market would become more stable. Listed companies "should release more information, be more transparent and try to realize sustained growth," he said. "They should try to attract investors through company performance and things like dividends, not just by announcing big projects whenever they have new offerings.[7]

"Investors expect the government to announce more measures to revive market sentiment," said Zhu Haibin, an analyst at Essence Securities.[44]

Analysts said the move would give the market a short-term boost, because sentiment, hit by sharp falls, was heavily dependent on supportive government measures. They warned that negative factors behind a deep correction, which has caused the benchmark index to fall by nearly half since October, remained unchanged.[26] The widely anticipated measure contributed to the day's 4.2% rise in the Shanghai Composite Index.[50] The composite index rose 0.7 percent to 2,844.02 as bargain-hunters stepped in, encouraged by Wall Streets advance overnight on upbeat quarterly results.[52]

The weighted index closed down 0.2 percent at 8,990.33 as technology stocks remained weak ahead of first-quarter earnings reports from heavyweights Taiwan Semiconductor Manufacturing Co. and United Micro Electronics Corp.[52] "I wanted to put all my energy into daily stock trading,'' Shen says. "The market was making millionaires every day, and I thought this was my last chance to be a young, wealthy and successful person.'' She earned a return of 40 percent in the first five months, and lost it all in the following five weeks.[9] My friend Mark Williams of Capital international is quoted in today'''s Financial Times as saying '''The government'''s continued efforts to manage the level of prices condemns the equity markets to further volatility.''' I am afraid he is right. How effective will this move be in keeping the market from sagging further? Sunday'''s move created a real frisson of excitement Monday morning, but it quickly fizzled out. Last night'''s move has already been far more effective, but the reported doubling of stock trading volume today doesn'''t indicate to me that people were excited about holding onto these newly-valuable stocks.[42] Compared to other emerging Asian markets, stocks in China are still relatively expensive, trading at about 25 times earnings.[7]

The Ministry of Finance said it will reduce a tax on trading to 0.1% of the value of each purchase or sale of stock, effective Thursday.[50]

Li from China Jianyin Investment said that the trading tax reduction may not necessarily good because the market may begin to rely on government intervention whenever it slumps. "It sets a bad precedent," he said.[30] Three hours later, a short piece of news about the stamp tax reduction was announced on CCTV news, China 's most prominent news source. Wang Qishan has a good bit of financial experience on his resume'. He has served as Vice Governor of the People's Bank of China (PBoC), China 's central bank, and as the president of the China Construction Bank (CCB). It was during this time that he promoted the establishment of China International Capital Corporation, Ltd., China 's first investment bank joint venture, between CCB and Morgan Stanley.[14] On April 24, the Ministry of Finance of China and State Administration of Taxation brought down the stamp tax down to 0.1% from the previous 0.3%.[14]

Although the stamp tax wasn't onerous in the market's heyday last year, the move to pare it helped boost depressed investor psychology.[7] The long-awaited move rolls back the so-called stamp tax to the rate it was a year earlier, when Beijing raised the surcharge to cool what was then a heady market.[7]

Analysts warned, though, that short-term measures like the stamp tax cut will have only a transient effect, and that longer-term worries over interest rates and other economic policies are bound to limit the markets recovery.[24] Analysts also blamed the release of a large amount of non-tradable shares into the market, saying the tax cut could not tackle all the current problems.[23] The cut reversed the increase imposed by the government in May 2007, when it was trying to cool surging share values.[35]

The government issued a regulation to limit sales of previously non-tradable shares after the lock-in period - which could be worth trillions of yuan - to reduce capital-draining pressure on the market.[30] China issued new rules placing curbs on the sale of non-tradable shares coming out of lock-up periods.[26] The reduction in trading cost followed new trading rules announced during the weekend that ordered the selling of big amount of shares to be conducted on a bloc trading system.[5] Further measures are expected, including a possible reduction in the tax on share trading if the market keeps falling.[45] Regulators reportedly appealed to mutual funds to stop dumping shares to help support the market after it dipped below the 3,000 level during trading Tuesday, to 2,990.79.[28]

The bruising bear market, however, has partially resolved other problems. Fund managers say valuations have dropped considerably - the average premium of domestically listed A shares over Hong Kong-listed H shares in Chinese companies shrank as far as 28per cent this week, its lowest level since last July, from a peak of 113per cent in January this year.[21] Before things turned sour late last year, millions of ordinary Chinese jumped into the market, many buying shares almost blindly with expectations of raking in big profits.[7]

New Chinese Vice Premier Wang Qishan, in charge of financial and economic policies, is polishing a reputation gained through long years serving in the breech. Investors and market analysts are applauding moves made under his leadership.[14] The new policy suggests Beijing isn't opposed to taking steps that might slow investor selling and revive confidence -- but it stops far short of preventing major shareholders from unloading stock, as some investors had hoped Beijing would do. The plan is meant to "stabilize investors' expectations" about the amount of stock that might be offered onto the markets, according to a statement Sunday quoting a spokesman for the CSRC. It is also designed to reduce share-price volatility when such transactions take place, the spokesman said.[6] Regulators on April 20 required shareholders selling more than 1 percent of a stock to do so in single trades, to keep the transactions off the open market.[1] Most recently, the securities regulator last week ordered shareholders looking to sell more than 1% of a stock to do so in single block trades, to keep the transactions off the open market.[11]

The Nikkei 225 Stock Average closed down 0.3 percent at 13,540.87 with investors taking to the sidelines as the local reporting season set in. [52] Any further declines would further erode the holdings of the country's retail investors, who have turned to the stock market in large numbers to earn better returns than the negative real interest rates offered by banks.[11] European stock markets lost ground after a liquidity injection designed by the Bank of England to ease the United Kingdom interbank credit squeeze failed to lift market sentiment, and Asian markets mostly rose.[6]

China's stock market peaked in value on Jan. 14 at $4.8 trillion and had lost $1.9 trillion through yesterday, equivalent to the value of Canada and Germany's stock markets.[16] China's stock market was still immature in many aspects and needed urgent improvement in transparency, efficiency, and safe operation, said an executive meeting of the State Council presided over by Premier Wen Jiabao on Wednesday.[23] Better regulation in other aspects, including refinancing, was needed to help China's stock market develop healthily and stably, Lin said.[23]

Thomson Reuters is the world's largest international multimedia news agency, providing investing news, world news, business news, technology news, headline news, small business news, news alerts, personal finance, stock market, and mutual funds information available on Reuters.com, video, mobile, and interactive television platforms.[29]

Bank stocks were especially volatile, reversing the gains made Friday, with downward movements compounded by news that Royal Bank of Scotland could launch the largest rights issue seen in Europe; RBS shares fell 3%.[6] Share prices closed lower ahead of first-quarter earnings from major companies, with weak regional bourses and a lackluster Wall Street also weighing on sentiment. Bellwether technology stocks were hit by earnings worries, while textile and cement saw further profit-taking on concerns over their high price-to-earnings multiples.[43]

The benchmark S&P;/ASX 200 closed down 1.2 percent at 5,587.3 as lingering credit concerns weighed on financial stocks, while weaker metal prices weighed on mining stocks.[52] Baosteel, the country's largest iron and steel maker, rose 6.61 percent to 10.96 yuan. Financial stocks continued their recent gains as nearly half of the sector reported a rise of more than 5 percent.[13] Industrial Commercial Bank of China gained 2.5 percent to 6.14 yuan; Ping An Insurance rose 2 percent to 58.13 yuan and Shanghai Pudong Development Bank jumped 5 percent to 31.61 yuan.[37] Among other big gainers, Aluminum Corp. of China was up 10 percent at 22.57 yuan, Industrial and Commercial Bank of China gained 7.9 percent to 6.81 yuan and Baoshan Iron Steel Co. rose 10 percent to 12.06 yuan.[24]

Among the gainers, market heavyweight PetroChina rose 3.2 percent to 16.52 yuan and oil refiner China Petroleum Chemical Corp., or Sinopec, added 0.7 percent to 10.88 yuan.[28] Ping An Insurance (Group) Co., China's second-biggest insurer, rose 6.07 yuan, or 10 percent, to 66.78.[1]

Citic Securities, China's biggest publicly traded brokerage, slumped 3.13 yuan, or 5.7 percent, to 51.88, the most since April 14.[16] Haitong Securities Co., the country's second-largest listed brokerage, added 3.55 yuan, or 10 percent, to 39.03.[1]

The company said first-quarter profit fell 84 percent to 15.8 million yuan ($2.26 million) after snowstorms cut production and prices dropped. [16] Turnover on the two bourses amounted to 11.93 billion yuan ($1.72 billion), up 38.5 percent from Tuesday.[44] In 2007, government coffers received a total of 220.5 billion yuan in revenue from the stamp duty, 10 times the figure from the year before, the State Administration of Taxation said previously.[25] Combined turnover hit 263 billion yuan (37.57 billion U.S. dollars), twice that of Wednesday. In Shanghai, volume was 191.7 billion yuan, the most since the beginning of this year.[2]

The rollback was officially announced after markets closed Wednesday, but investors apparently got wind of the impending action earlier in the day, as the Shanghai index jumped 4.2%. [7] In the opening minutes Monday, the Shanghai index soared 6.8% on hope the measure signaled Beijing had come to the rescue.[6] Shanghai Index had plunged 51% from all time high of 6,092 in October to low of 2,990.8 on April 22.[39]

For the first time in more than a year, the Shanghai benchmark dropped below 3,000 briefly on Tuesday before rebounding later in the day.[17] The latest one-two punch is likely to boost investors''' confidence, creating what some believe could be a nice government-planned run-up leading to the Olympics in August. "I believe this was a signal given by the government that the market should not drop below 3,000," said Kevin Dai, 27, a Shanghai investor.[15] An investor looks at a monitor displaying stock information at an exchange in Shanghai Thursday April 24, 2008.[17] The ordinaries market in Shanghai rallied some 9% today. The extra sovereign wealth funds will be good for whichever country those funds end up in, while the U.S. and other countries might want to note what taking out "transaction costs" can do for investor confidence.[47] Yan at Jintrust Fund Management advised investors to pay close attention to companies in upstream industry, high-end consumption, and electric and rail companies which attract government investment.[44] Coupled with the declines was plummeting investor confidence, as evidenced by the lackluster sales of once red-hot investment funds. That prompted more and more financial experts to join the chorus for regulators to act.[5] On April 20, regulators announced curbs on the sale of non-tradable shares that come out of lock-up periods.[2]

Vincent Chan Cheong-wa, Credit Suisse head of China research, said: "The measures only delay the problem. A shares will continue to fall and underperform their H-share peers."[19]

"The new move is not surprising," said Li Zhikun, board secretary and head of international investment of China Jianyin Investment Securities. "It is a sign of the government's efforts to shore up the market."[30] We can't expect the bearish sentiment to recover just overnight, but the move was in the right direction," said Andrew Wong Wai-hong, associate director at One China Securities.[19]

Lin Songli, analyst at Guosen Securities in Beijing, said the decision was expected because the market had sunk as far as the government was willing to tolerate. "If the market continues to decline, it may hurt the real economy, especially domestic consumption," he said. "The next step for the government will be to slow down the approval of IPOs and the issuance of additional shares," he added. [29] "The lowering of the stamp duty. is among the most aggressive steps the government could have taken to improve sentiment," said Jing Ulrich, a Hong Kong-based analyst with JPMorgan Securities.[26] 'The government will certainly have to find a balance between economic growth and inflation,' said Cheng Weiqing, a Beijing-based analyst with Citic Securities.[8]

"Investors need to take a sensible attitude as the policy was actually aimed at adjusting the psychology of investors," Guosen Securities analyst Lin Songli said, warning that policy adjustments might make the market more volatile.[2] "I hope it will keep rising for another ten days. That sounds like a daydream, but it would be perfect," said office worker Zhou Yu, who joined scores of other jubilant and relieved investors watching the price boards in a downtown securities company lobby.[24]

We might need a period of stability and rising prices before Chinese or foreign investors jump back in. It is worth noting, by the way, that B-shares, which have all the rights and dividends of A-shares but trade in foreign currency and can be purchased by foreigners, are trading at discounts to A-shares of 35-45%. One can make a very plausible argument that they are a great medium-term buy, especially if, as is widely expected, the distinction between the two is eventually eliminated and B-shares are converted into A-shares.[42] In currency dealings, the Chinese yuan began trading Wednesday at a new record high against the U.S. dollar of 6.9837.[28] Zhongjin Gold lost 6.4 percent to 54.78 yuan. In currency dealings, the U.S. dollar was trading at 6.9906 yuan late Tuesday on the over-the-counter market, down from its previous close of 7.0000.[37]

Zhuzhou Smelter Group Co., China's biggest producer of refined zinc, lost 0.89 yuan, or 8.4 percent, to 9.75.[16] Nonferrous metals led decliners, with Aluminum Corp. of China down 1.3 percent to 19.34 yuan.[37]

China's economy has grown by more than 10 percent annually for five straight years and the first-quarter expansion was 10.6 percent over the same period of 2007.[17] Loan growth, in other words, may be higher than the PBoC thinks because of non-regulated loan growth in the informal banking sector. How much more tightening do the authorities want? Although I am skeptical that they have the tools to mange monetary policy, I had suggested in earlier entries that the minimum growth they would accept would probably be determined by the amount of growth needed to keep unemployment for accelerating. I speculated that this might be around 10%. Today'''s Bloomberg has an interesting variant on this. China should stick with its tight monetary policy unless the economy's expansion slows to below 9 percent, a National Bureau of Statistics official said.[42]

Nonetheless the move is being seen as a signal that the authorities want to stop the index from dropping below 3,000 points, which could damage the economy and possibly trigger social unrest.[4] "But the rebound won't last unless the economy shows clear signs of improving." The index faces initial technical resistance on its 20-day average, now at 3,377 points, which halted a rally in early April.[36]

The Shenzhen Component Index surged 5.45 percent, or 609.38 points to close at 11784.15.[44] The Shenzhen Component Index opened at 12787.38, 892.14 points, or 8.51 percent, up from the previous close.[23]

The KOSPI index closed down 0.1 percent at 1,799.34 with Hyundai Motor Co. tumbling more than 4 percent after the carmaker reported weaker-than-expected results for the first quarter.[52] Rumors that another market-boost measure was in the works helped push the index up 4.2 percent on Wednesday.[17]

At the same seminar Fan Jianpang, the State Information Center's economic forecast chief, said '''As long as inflation can be kept below 6 percent, there's no need for further tightening measures and economic growth should be able to stay strong. I don'''t know if they are saying this because they believe it or because they are simply observing the official line, but inflation is not going to come in below 6% in 2008.[42]

The reported average profit growth for 493 companies on the Shanghai and Shenzhen bourses in the first quarter was around 50 percent, higher than the projected whole-year corporate earnings. Around 1,060 companies will release their quarterly reports soon.[44] Shenzhen Development Bank Co., controlled by buyout firm TPG Inc., jumped 2.50 yuan, or 10 percent, to 27.49.[1] Market heavyweight PetroChina gained only 0.3 percent to 16.06 yuan, after rising more than 3 percent earlier in the day.[20] Market heavyweight PetroChina fell 0.3 percent to 16.01 yuan, helping to cap the gains.[37]

The stamp duty will be slashed to 0.1 percent from 0.3 percent, according to a notice issued by the Ministry of Finance and the General Administration of Taxation.[30] Jing Ulrich, chairwoman of China equities for JPMorgan Chase & Co, told AFP the lowering of the stamp duty "is among the most aggressive steps the government could have taken to improve sentiment".[4] "In recent weeks, expectations have been mounting on the government to take decisive steps to prop up the domestic markets," Jing Ulrich, chairwoman of China equities for JPMorgan Chase & Co.[48]

China in December tripled to $30 billion the amount overseas institutions can invest in yuan- denominated stocks and bonds. [1] At any rate given how far it has come off since October is the market finally fairly valued? According to Bloomberg the market is priced at roughly 21 times earnings. This is not cheap, but with real interest rates negative (and declining in real terms), and with GDP growth still very high, this might suggest that certainly for ordinary Chinese stocks are a pretty good alternative to bank deposits, and for the rest of us they are a reasonable play on Chinese long-term growth.[42] Chinese stock prices have fallen sharply since October, ending a boom that began in mid-2006.[17] The move addressed concerns about a flood of stock coming into the market quickly and sending prices lower.[26]

"When the PEG falls below 0.5, the stock valuation is regarded as attractive by international standards," said Wu Feng, an analyst at TX Investment Consulting Co Ltd.[44]

With today's gain, it closed at 3,583. That's still a long way down from a record high of 6,092 in mid-October, but now some investors and analysts think China's great bear market is over.[7] Cheng Siwei, former National People's Congress vice chairman, said China's economy is still strong and investors should not overreact to fluctuations.[19] Some called the rebound as a knee-jerk reaction and a short-lived one as concerns over the economy, inflation and corporate earnings remain. Others argue that the move revealed the official stance and is sure to attract more investors back into the game.[18] Tom Petruno has been chronicling financial markets' highs and lows since 1979, and has been the Times' financial columnist since 1990. He writes on markets, corporate finance and the economy, and how it all ties in to individual investors' portfolios.[15]

"Investors need to take a sensible attitude as the (stamp tax cut) policy was actually aimed at adjusting the psychology of investors," Lin said, warning that policy adjustment might trigger bigger rises and falls.[23] China lost nearly USD 2.4 trillion in market-cap since the peak. Small players will get affected than big institutions due to this tax cut.[39]

Sure enough the market shot up nearly 7% in the morning before giving away nearly 90% of the gains over the rest of the day. Since that announcement was not enough, the government made its next big signaling effort last night and reduced the stamp tax. I have discussed in earlier entries that this was much-rumored during the past few months. [42] The tax rollback was officially announced after markets closed Wednesday, but investors apparently got wind of the impending action earlier in the day.[15] The gauge retreated slightly as investors who bought shares in the past few days unloaded shares to lock in profits.[18]

I would almost read it as professionals taking advantage of higher prices to shift shares into the hands of retail speculators. Let'''s see how firm the rally is over this week and next.[42]

Chinese consumer prices rose 8.3 percent in March as food costs jumped and after the worst snowstorms in half a century destroyed crops and paralyzed transport.[1] Prices, which grew at 8.3 percent in March, have risen as raw-materials costs rose and after the worst snowstorms in half a century destroyed crops, paralyzed transport systems and disrupted electricity supply.[16]

Total capitalization swelled 4.26 percent to 21.03 trillion yuan ($3 trillion). [44] Analysts think appreciation of the yuan and China's capital controls justify some premium.[21] Analysts say the cut stamp duty will make little difference to the investment costs of anyone but the most active traders.[4] "The market is unlikely to see the mad and bold speculation that we had last year," said Zhang Qi, analyst at Haitong Securities.[22] The public trading halls of several Shanghai brokerages on Thursday contained little of the euphoria seen during last year's steep uptrend, dubbed the market's "mad bull" phase by local media.[22] One of history's biggest equity bull markets ended abruptly late last year as investors began to fret about sky-high valuations, rising inflation and heavy supplies of fresh equity.[21]

"The dive is the reflection of investors' mounting concern about the economic scenario,'' said Zhang Ling, who manages $1.1 billion at ICBC Credit Suisse Asset Management Co. in Beijing.[16]

'The key index is likely to climb to around 4,000 points in the near term,' Zhang added. 'I'd only say it's a rebound for the time being. [8] "I wish the government would save the market so I could earn my money back." Cao Jun in the Times' Shanghai bureau contributed to this report.[7]

"Market boost digested in just one day,'' sighed a headline in the daily financial newspaper China Business News. [9]

SOURCES

1. Bloomberg.com: Worldwide
2. Tax cut propels China stocks to biggest gain since late 2001_English_Xinhua
3. CCTV International
4. MWC News - A Site Without Borders - - Tax cut boosts China stocks
5. China stocks rally after stamp tax cut
6. Beijing Unveils Stock Plan - WSJ.com
7. Stock market rallies in China - Los Angeles Times
8. More stimulus needed to stabilize Chinese stock markets, analysts say - Forbes.com
9. China's stock market plunge gives investors a taste of downside of capitalism- Global Markets-Markets-The Economic Times
10. Chinese shares skyrocket | The Australian
11. Asia Times Online :: China News, China Business News, Taiwan and Hong Kong News and Business.
12. VietNamNet - Tax cut propels China stocks to biggest gain since late 2001
13. Chinese shares rally on financial, metal stocks
14. Wang Qishang'''s Decisive Steps Spur Shanghai Rebound
15. Beijing signals it has seen enough stock-market misery : Money & Company : Los Angeles Times
16. Bloomberg.com: Worldwide
17. The Associated Press: Shanghai index soars 9.3 percent on tax cut
18. Stocks jump over 9% after stamp tax cut
19. The Standard - Hong Kong's First FREE English Newspaper
20. FOXNews.com - China stocks rise on new trading rules - Business And Money | Business News | Financial News
21. Trading tax cut to bolster China bourse | smh.com.au
22. China's mad bull market unlikely to be revived | Special Coverage | Reuters
23. Chinese shares close sharply higher in morning session on overnight trading tax cut_English_Xinhua
24. Chinas Shanghai index soars 9.3 percent after government cuts tax on stock transactions - International Herald Tribune
25. AFP: China cuts stamp duty to boost stock market
26. AFP: Chinese shares open up nearly 8 percent on stamp duty cut
27. Greater China stock market summary - Forbes.com
28. China shares rebound; government moves to boost markets by cutting stamp tax - International Herald Tribune
29. UPDATE 2-China cuts stock trading tax to salvage markets | Markets | Markets News | Reuters
30. Trading tax cut to shore up market
31. Shanghai index soars 9.3 pct on tax cut | Chron.com - Houston Chronicle
32. Shanghai index soars 9.29% as stock tax cut -- Shanghai Daily | '''''''''''' -- English Window to China News
33. Singapore hot stocks-S-shares soar after tax cut in China- Global Markets-Markets-The Economic Times
34. China's stocks soar on equity tax cut - Business
35. BBC NEWS | Business | Tax cut boosts China share prices
36. China stocks surge over 3 pct, led by financials- Global Markets-Markets-The Economic Times
37. China shares mixed; technical rebound reverses early Shanghai losses, index gains 1 percent - International Herald Tribune
38. Chinese shares rise 8 percent on transaction tax cut - Forbes.com
39. Moneycontrol India :: News :: Shanghai up 10% as China cuts stamp duty on stks :: :: MARKET OUTLOOK :: Varinder Bansal
40. Free Preview - WSJ.com
41. China A-shares end morning lower; nonferrous metals stocks down - Forbes.com
42. Shanghai Market Surges 9.3% on Stamp Tax Cut - Seeking Alpha
43. Greater China stock market summary - Forbes.com
44. Mainland stocks rebound
45. BBC NEWS | Business | China shares down 50% from peak
46. China exchanges issue guidelines on lockup share restrictions - report - Forbes.com
47. 24/7 Wall St.: China Exporting Wealth & Dropping Investor Tax
48. The Press Association: Shares soar on transaction tax cut
49. RTTNews - Global Market News, Asian Market Update, Market & Sectors, Forex Audio News.
50. Free Preview - WSJ.com
51. UPDATE 1-PRESS DIGEST - China - April 24 | Industries | Consumer Goods & Retail | Reuters
52. Asian stock market summary | Latest News | News | Hemscott

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