Editorial | Mainland, Hong Kong stock market moves reflect challenging times

China’s economic outlook is clouded by a patchy recovery from the pandemic slowdown, exemplified by a weak property market and record unemployment among young people.

This had fuelled hopes of a mortgage rate cut that failed to materialise earlier this month when the central bank only trimmed a corporate lending reference rate.

Now the authorities have made it plain their paramount goal is to bolster capital markets and lift investor confidence generally, by halving stamp duty on mainland stock transactions.

It is a big call, given that China already has the world’s third-cheapest transaction cost, only higher than New York and Tokyo – both zero.

The halving of duty effective yesterday to 0.05 per cent makes transactions even cheaper. Benchmark stock indexes in Shanghai and Shenzhen jumped after the announcement and were still up at the close. But the euphoria may be short-lived, analysts warn.

People buy stocks for reasons related to economic growth, and not marginal cost relief. They are bought in the hope that they will appreciate, and the company in question will pay dividends thanks to corporate growth.