ASIALINKS DAILY VIEW
By MICHAEL CONNOLLY
Anticipation of Beijing slashing a tax on stock transactions was credited with contributing to a 4.1% surge Wednesday in the Shanghai Composite Index, which has shed about half its value in the past six months. After the market closed, the government cut the tax from 0.3% to 0.1% -- where it was about a year ago when Beijing raised it to stem stock speculation by individual investors, who comprise the bulk of China's stock market.
As James T. Areddy reports, the tax cut is the second step this week by Beijing to put a floor under stocks. On Sunday, after the market's worst week in years saw the Shanghai index fall nearly 12%, the China Securities Regulatory Commission said that to "stabilize" investor sentiment it would require certain big block trades to take place off the regular stock market in a way that might reduce share-price volatility and that could complicate selling by major investors.
Last year's tax increase sparked wholesale changes in the way China's individual, or retail, investors looked at stock trading, by highlighting the attributes of blue-chip stocks and mutual funds instead of the penny stocks that had been all the rage of speculators in the early part of last year's rally. The cut comes as Beijing readies a new wave of initial public offerings of small companies, and a lower tax could make them look cheaper. Beijing considers small stocks a future driver for its market development.
Read James T. Areddy's report from Shanghai:
