China halves stamp duty on securities transactions and lowers margin requirements for stock purchases to boost investor confidence

The Ministry of Finance and the state tax authority announced on Sunday that the 0.1 percent stamp duty rate on securities transactions will be “halved” from Aug. 28 to “invigorate the capital market and boost investor confidence.”

On the same day, the China Securities Regulatory Commission (CSRC) revealed separate stimulus measures that included lowering the margin requirement for investors to buy securities to 80% from 100%, which will take effect after the market closes on September 8.

However, other market analysts expect the stamp duty cut to have an immediate positive effect.

Kenny Tang Sing Hing, president of the Hong Kong Institute of Professional Financial Analysts and Commentators, said the stamp duty cut would help stock markets open 2 to 3 percent on Monday.

They can also provide 120 billion yuan to 130 billion yuan ($16.6 billion to $18 billion) in profits for mainland stock markets annually, according to Jiang Yifan, an investment advisor at Guotai Junan Securities, in his Weibo post. Sunday.

The new initiatives reinforce a pledge made by China’s top policymakers in July to boost the country’s capital markets and boost investor confidence.

Hong Kong stocks continue to rebound from 9-month lows thanks to earnings and stimulus bets

The decline in the stock market may lead to more uncertainty about the prospects for the second largest economy in the world, which is suffering from an uneven recovery after the epidemic, deflationary pressures, a record high youth unemployment rate, and a weak real estate market.

When the tax was last cut from 0.3% to 0.1% on April 24, 2008 to boost investor confidence during the global financial crisis, the CSI 300 posted a daily gain of 9.3%. The index also rose by the same margin on September 19 of that year, when the government abolished the tax on stock purchases.

CSRC pledges to promote the “vitality, efficiency and attractiveness” of the stock market

Separate measures announced by the Securities and Exchange Commission on Sunday included taking more steps to regulate stock reductions made by major shareholders as well as directors and senior executives of listed companies.

The SRC said on its website that this would help “improve the relevant liability clauses and intensify the campaign against the illegal reduction of contributions”.

In a separate announcement on Sunday, the regulator said it would also “tighten the pace of IPOs in stages” in order to “enhance the dynamic balance” between investment and financing.

Domestic investors in China warn of a bigger sell-off unless stimulus is introduced

Foreign investors sold 77.9 billion yuan (10.7 billion U.S. dollars) worth of shares in the world’s second-largest stock market in 13 consecutive trading sessions through Wednesday through the northbound channel of the Cross-Border Exchange Connection Program with Hong Kong, according to Bloomberg data. . . This chain of sale represents the longest action of its kind since data collection began in December 2016.

Additional reporting by Zhang Shidong