Advertisement
Advertisement
Bank of China (BOC)
Get more with myNEWS
A personalised news feed of stories that matter to you
Learn more

Markets rally on mainland's stamp duty cut

Nick Westra

Shanghai index surges 9pc as intervention boosts confidence

Investors went on a frenzied chase for mainland stocks yesterday on news of a cut in the stamp duty on share transactions, lifting A shares to near their intraday trading limit and taking the Hong Kong market along in the rally.

The Shanghai Composite Index shot up 304.70 points, or 9.29 per cent, to 3,583.03 for its largest single-day gain since October 23, 2001.

Given a rare reprieve from heavy selling pressure, nearly 500 stocks - more than half the benchmark's total members - hit the 10 per cent daily trading limit.

The euphoria across the border overflowed to the Hang Seng Index, which defied the region's lacklustre performance to add 1.55 per cent, closing at 25,680.78. The H-share index jumped the most in three weeks, gaining 4.18 per cent.

'Investors believe the [central] government is not ducking its responsibility to stabilise the market,' Dazhong Insurance fund manager Wu Kan said. 'The market saw an influx of fresh capital amid the belief the 3,000-point level is the bottom.'

Elsewhere in the region, investors were not in a buying mood after Credit Suisse made known it had fallen victim to the credit crisis. Switzerland's second-largest bank reported a net loss of 2.15 billion francs (HK$16.26 billion) in the first quarter, its first loss in nearly five years, on subprime-related provisions.

Regional markets edged down on the news, with Japan falling 0.28 per cent, Indonesia 1.92 per cent, Taiwan 0.20 per cent and Korea 0.08 per cent.

In a research report released yesterday, HSBC regional strategist Steven Sun and his team of analysts likened the cut in stamp duty on mainland share transactions from 0.3 per cent to 0.1 per cent to an injection of more than 100 billion yuan (HK$111.5 billion) into the A-share market.

The announcement of the cut signalled Beijing's commitment to prop up the ailing mainland market.

'The lowering of the stamp duty is among the most aggressive steps the government could have taken to improve sentiment,' said Jing Ulrich, head of China equities at JPMorgan.

The combined turnover on the Shanghai and Shenzhen exchanges surged 120 per cent to 263.5 billion yuan. Trading levels may stay high in the near term as bullish investors speculate that a rally won't run out of steam until the Shanghai index breaches 4,000 points.

Major mainland insurers China Life Insurance and Ping An Insurance (Group) both surged 10 per cent yesterday across the border. Industrial and Commercial Bank of China, the world's largest lender by market value, gained 7.92 per cent.

But some analysts warned that gains may be shortlived and profit-taking could stand in the way of a sustained rally in Shanghai because the market boost was mostly technical.

'A correction is looming,' said Zheng Tuo, a fund manager at Bank of Communications Schroders Fund Management. 'The economy and corporate performance are still the main concerns.'

In Hong Kong, main board turnover hit HK$130.26 billion as investors chased after mainland-related stocks.

Giant oil and gas producer PetroChina, the fourth largest H-share index constituent, climbed 4.78 per cent to HK$11.84. Its A shares rallied 9.87 per cent to close at 18.15 yuan in Shanghai.

Additional reporting by Wong Ka-chun

Post