Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
President Donald PUMP Forecast to Win US Presidential Election 2024 - 1st Nov 24
At These Levels, Buying Silver Is Like Getting It At $5 In 2003 - 28th Oct 24
Nvidia Numero Uno Selling Shovels in the AI Gold Rush - 28th Oct 24
The Future of Online Casinos - 28th Oct 24
Panic in the Air As Stock Market Correction Delivers Deep Opps in AI Tech Stocks - 27th Oct 24
Stocks, Bitcoin, Crypto's Counting Down to President Donald Pump! - 27th Oct 24
UK Budget 2024 - What to do Before 30th Oct - Pensions and ISA's - 27th Oct 24
7 Days of Crypto Opportunities Starts NOW - 27th Oct 24
The Power Law in Venture Capital: How Visionary Investors Like Yuri Milner Have Shaped the Future - 27th Oct 24
This Points To Significantly Higher Silver Prices - 27th Oct 24
US House Prices Trend Forecast 2024 to 2026 - 11th Oct 24
US Housing Market Analysis - Immigration Drives House Prices Higher - 30th Sep 24
Stock Market October Correction - 30th Sep 24
The Folly of Tariffs and Trade Wars - 30th Sep 24
Gold: 5 principles to help you stay ahead of price turns - 30th Sep 24
The Everything Rally will Spark multi year Bull Market - 30th Sep 24
US FIXED MORTGAGES LIMITING SUPPLY - 23rd Sep 24
US Housing Market Free Equity - 23rd Sep 24
US Rate Cut FOMO In Stock Market Correction Window - 22nd Sep 24
US State Demographics - 22nd Sep 24
Gold and Silver Shine as the Fed Cuts Rates: What’s Next? - 22nd Sep 24
Stock Market Sentiment Speaks:Nothing Can Topple This Market - 22nd Sep 24
US Population Growth Rate - 17th Sep 24
Are Stocks Overheating? - 17th Sep 24
Sentiment Speaks: Silver Is At A Major Turning Point - 17th Sep 24
If The Stock Market Turn Quickly, How Bad Can Things Get? - 17th Sep 24
IMMIGRATION DRIVES HOUSE PRICES HIGHER - 12th Sep 24
Global Debt Bubble - 12th Sep 24
Gold’s Outlook CPI Data - 12th Sep 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Chinese Government Intervention Sends Shanghai Stocks Soaring

Stock-Markets / Chinese Stock Market Apr 25, 2008 - 05:23 AM GMT

By: Jason_Simpkins

Stock-Markets Stock prices soared in China yesterday (Thursday) after the government announced Wednesday night that a tax on stock trades would be reduced. Beijing's decision to lower the trade tax from 0.3% to 0.1% was motivated by a steep drop in many mainland indices over the past six months.


The Shanghai Composite Index rocketed 9.3% Thursday, to close at 3,583.03, after rising 4.15% prior to the announcement. Before the rally fears over inflation and a downturn in global growth sent the index diving 40% this year, and by as much as 50% from its Oct. 16 peak.

The first three months of 2008 amounted to the worst quarter ever for the benchmark index, but yesterday's gain was the largest single day increase in more than seven years.

The Shenzhen Component Index jumped 9.59% to 12,914.76. And in Hong Kong the Hang Seng index gained 1.5%, even though the Hong Kong market is not subject to Beijing's regulation.

"The stamp tax cut is a political signal that the government is taking actions to save the stock market," Qian Qimin, an analyst in Shanghai for Shenyin & Wanguo Securities told the International Herald Tribune . "This lowers trading costs and stimulates trading activity. And what is more important is the political meaning, that the government is paying attention to the capital market and won't stand by and let it sink."

Many analysts anticipated a sharp downturn this year because of the radical gains that characterized the Chinese market throughout 2006 and 2007. Drastic gains stirred up investor frenzy in the Asian nation inflating stock values beyond what might be considered a reasonable market value.

While reducing the tax may have reignited investor confidence, it did nothing to improve market fundamentals and analysts warn that policy adjustments could make the market even more volatile.

"Investors need to take a sensible attitude as the [tax cut] policy was actually aimed at adjusting the psychology of investors," Guosen Securities analyst Lin Songli told Xinhua , China's official news agency.

Beijing's market manipulations could also backfire. The government walks a fine line between letting the market operate on its own and intervening to shelter the populace - and the economy - from extreme fluctuations.

Last May, when Beijing suddenly tripled the stock-trading tax, the Shanghai market tumbled and angry investors chided the government for raining on their parade. But today, investors applaud the government's intervention and wonder what took so long.

"The government should have saved the market because it is mainly small and individual investors who suffered. We don't have the information that many institutional investors have," Chinese citizen, Liu Rongsheng, told the Los Angeles Times .

News and Related Story Links:

By Jason Simpkins
Associate Editor
Money Morning/The Money Map Report

©2008 Monument Street Publishing. All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Monument Street Publishing. 105 West Monument Street, Baltimore MD 21201, Email: customerservice@moneymorning.com

Disclaimer: Nothing published by Money Morning should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investment advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication, or 72 hours after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Money Morning should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Jason Simpkins Archive

© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in