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Chinese stocks rallied on Monday after regulators cut a levy on stock trades for the first time since the 2008 financial crisis and pledged to slow the pace of initial public offerings in an effort to boost investor confidence.
The benchmark CSI 300 index of Shanghai- and Shenzhen-listed stocks led Asian markets higher, climbing as much as 5.5 per cent in early trading before pulling back to be up 1.5 per cent. Hong Kong’s Hang Seng index climbed 1.4 per cent.
The gains for Chinese stocks came after the Ministry of Finance announced on Sunday that it would halve the stamp duty levied on all stock trades to 0.05 per cent in order to “invigorate capital markets and boost investor confidence”, the first such cut since 2008.
Separately, the China Securities Regulatory Commission said it would slow the pace of initial public offerings in light of “recent market conditions”. New listings in China often sap liquidity from broader markets and can depress valuations, as retail investors cash out of their holdings to put money towards new share offerings.
The stamp duty cut and IPO slowdown mark the latest attempt by Beijing to reinvigorate Chinese markets. Top leaders promised greater economic support in late July, spurring net foreign inflows to Chinese stocks, but those have since been completely reversed.
“I would love to say this time was different,” said a trading desk head at one Chinese brokerage in Hong Kong, “but the market is still incredibly pessimistic based on the flows we are seeing today. People are selling into the rally, and investors don’t really see these moves as a catalyst for changing the bigger economic picture.”
While regulators had hinted at the latest measures in an announcement this month, the speed with which they were delivered surprised markets, traders said.
“The good news is that we are seeing more easing measures,” 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 piecemeal, especially in the context of the severe property downturn.”
The intensity of the liquidity crisis in China’s real estate sector was underscored by a fall of about 80 per cent for Hong Kong-listed shares in struggling 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 at Hong Kong-based brokerage Wealthy Securities. “We had a similar rally last month after top officials promised more support, but that has dissipated, and this looks like the same thing. They have to take concrete, sustained action.”
Futures markets tipped the S&P 500 to open 0.1 per cent higher on Wall Street later in the day, while markets in London are closed for a bank holiday.
Elsewhere in the region, Japan’s Topix index rose 1.3 per cent and Australia’s S&P/ASX 200 was up 0.6 per cent.
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