China shares jump 9.5 per cent after gov't cuts tax on stock transactions

THE ASSOCIATED PRESS
SHANGHAI, China - Chinese shares soared early Thursday after the government cut a tax on stock transactions in a move widely seen as a signal of support for the markets.

The benchmark Shanghai Composite Index surged 9.5 per cent to 3,590.04 as investors resumed buying after weeks of holding back in hopes of market boosting news.

The jump came after the government announced late Wednesday that it was cutting a stamp tax on share transactions to 0.1 per cent from 0.3 per cent, reversing a move it made May 30 when it was seeking to cool surging stock prices.

The measure, which took effect Thursday, was approved by the State Council, Finance Ministry and State Administration of Taxation, the official Xinhua News Agency reported.

The Shanghai market has been hit hard recently, dropping to levels last seen in March 2007.

Alarmed by an 11 per cent slide in the Shanghai index last week, late on Sunday night the China Securities Regulatory Commission announced new restrictions on sales of large blocks of shares newly freed from lockup periods.

That move, showcased in front-page headlines of state-run newspapers, was explicitly aimed at reassuring investors fretting over some $430 billion in previously nontraded shares due to enter the market this year. But it did little to spur buying.

The stamp tax reduction seems to have done the trick, for now.

The Shanghai index was helped Thursday by a 7.1 per cent advance in PetroChina's stock, to 17.70 yuan. Its shares account for about one-fifth of the benchmark's total value.

© The Canadian Press, 2008