China lowers stamp duty on stock trades, tightens IPOs to woo investors

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Bloomberg report citing the Chinese ministry of finance, the levy charged on stock trades will fall from 0.1% to 0.05% as of August 28. As per the report, China’s latest move is to “invigorate capital markets and boost investor confidence." The China Securities Regulatory Commission (CSRC) has cited recent market conditions as its rationale for slowing the pace of IPOs. According to the CSRC’s new rules, restrictions will be set on the frequency and size of refinancing for companies which continuously report financial losses and whose stock prices have fallen below IPO levels or net asset levels.

However, property developers have been exempted from the rule. “Authorities have been trying to disspell worries about the economy triggered by a slumping property market, trust defaults and weak consumer spending," the Bloomberg report. According to Bloomberg data, foreign investors sold mainland China stocks on a net basis for 13 consecutive sessions through Wednesday, the longest stretch ever.

Earlier this month, Chinese authorities had urged pension funds, large banks and other big domestic financial institutions to increase stock investments to support the market. The regulators have also reduced handling fees on stock transactions, allowed mutual fund managers to increase purchases of their own equity funds and encouraged companies to do more share buybacks, said the report. The stamp duty in China was last cut in April 2008.

It was reduced to 0.1% to support the market. In May 2007, China had raised the rate to 0.3% to cool a rally that was drawing more than 300,000 new investors a day. (With inputs from Bloomberg)Get the best recommendations on Stocks, Mutual Funds and more based on your Risk profile!