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Chinese stocks rose on Monday after regulators cut a tax on stock trading for the first time since the 2008 financial crisis and pledged to slow the pace of initial public offerings (IPOs) in a bid to boost investor confidence.
The benchmark CSI 300 index of stocks listed on the Shanghai and Shenzhen Stock Exchanges led Asian markets higher, rising as much as 5.5 percent in early trade before retreating, up 1.5 percent. In Hong Kong, the Hang Seng index rose 1.4 percent.
The gains in Chinese stocks came after the Finance Ministry announced on Sunday that it would halve the stamp duty levied on all stock trades to 0.05 percent in order to “energize capital markets and boost investor confidence,” the first such cut since 2008.
Separately, the China Securities Regulatory Commission said it would slow down the pace of initial public offerings in light of “recent market conditions”. New listings in China often drain liquidity from broader markets and can drive down valuations as retail investors pull money from their holdings to put money into new stock offerings.
Stamp duty cuts and a slowdown in public offerings are Beijing’s latest attempt to revitalize Chinese markets. Senior leaders promised greater economic support in late July, spurring net foreign inflows into Chinese stocks, but those inflows have since completely reversed.
“I would say this time was different, but the market is still incredibly bullish based on the flows we are seeing today,” said the head of a trading desk at a Chinese brokerage in Hong Kong. The moves as a catalyst to change the bigger economic picture.
Traders said that while regulators alluded to the latest measures in this month’s announcement, the speed with which they were delivered surprised markets.
“The good news is that we are seeing more easing,” Hui Shan, chief China economist at Goldman Sachs, wrote in a note following the moves. “But the bad news is that these measures are still incremental, especially in the context of the sharp downturn in the real estate sector.”
The severity of the liquidity crisis in China’s real estate sector was underlined by a nearly 80 per cent drop in the Hong Kong-listed shares of troubled real estate developer China Evergrande, which resumed trading on Monday for the first time in 17 months.
“It’s good in the short term, but who knows how long this rally will last,” said Louis Tse, managing director of Hong Kong-based brokerage Wealthy Securities. “We saw a similar march last month after senior officials promised more support, but that has dissipated, and it seems that this is the same thing. They need to take concrete and sustained action.”
Futures markets suggest that the Standard & Poor’s 500 index will open 0.1 percent higher on Wall Street later in the day, while markets in London are closed due to a bank holiday.
Elsewhere in the region, Japan’s Topix rose 1.3 per cent and Australia’s S&P/ASX 200 rose 0.6 per cent.