Tax cut propels China stocks to biggest gain since 2001

April 24th, 2008 - 7:54 pm ICT by admin  

Xinhua
Beijing, April 24 (Xinhua) The overnight announcement of a cut in share trading taxes drove Chinese stocks 9.29 percent higher in soaring turnover Thursday. The key Shanghai Composite Index was up 304 points to 3,583.03, the largest gain since Oct 23, 2001, when daily limits were introduced.

More than half of the 20 largest-capitalized shares rose by the daily limit of 10 percent Thursday, including Sinopec, the country’s biggest refiner, China Life, the largest life insurer, and steel maker Baosteel.

Brokerage shares led the gains, with investors expecting that these firms would benefit from an overall market rebound. Citic Securities, the biggest brokerage, soared 10 percent to 32.13 yuan.

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.

The Shenzhen Component Index jumped 9.59 percent to 12,914.76 points.

Combined turnover hit 263 billion yuan ($37.57 billion), twice that of Wednesday. In Shanghai, volume was 191.7 billion yuan, the most since the beginning of this year.

Turnover on the two bourses swiftly reached some 123.48 billion yuan in the first hour of trading Thursday, a record high.

Only two stocks fell, and more than 1,000 rose by the 10-percent daily limit.

The tax cut was the most aggressive move till date. On April 20, regulators announced curbs on the sale of non-tradable shares that come out of lock-up periods.

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 tax cut, while welcome, won’t eliminate the market’s problems. The prolonged downtrend would not be completely reversed unless inflationary pressures eased and housing prices stabilized, the commission said.

More than half of the 20 largest-capitalized shares rose by the daily limit of 10 percent Thursday, including Sinopec, the country’s biggest refiner, China Life, the largest life insurer, and steel maker Baosteel.

Brokerage shares led the gains, with investors expecting that these firms would benefit from an overall market rebound. Citic Securities, the biggest brokerage, soared 10 percent to 32.13 yuan.
Xinhua

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