Published September 19, 2008

Beijing acts to boost sagging stock market

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(BEIJING/SHANGHAI) China announced steps to bolster its sagging stock market, including scrapping its stamp tax on stock purchases and enlisting a government-controlled investment agency to buy shares of listed Chinese companies.

China's benchmark stock index slid for a third session in a row yesterday to a 22-month closing low, hit by turmoil in the global financial sector that weighed on banking shares. The Shanghai Composite Index has tumbled more than 20 per cent this month and is down nearly 70 per cent from its record peak last October.

China will end its 0.1 per cent stamp tax on purchases of equities, effective today, although the levy will still apply to sales of shares, state television reported. The tax had already been reduced from 0.3 per cent in April to try to prop up the market.

Separately, the official Xinhua news agency said Central Huijin, a government-controlled investment agency, would buy shares of Chinese listed companies to help stabilise the market. 'The government has sent a strong signal that it will support the stock market, in particular major banks,' said senior stock analyst Qian Qimin at Shenyin & Wanguo Securities in Shanghai.



Xinhua said Huijin, an arm of China Investment Corp, the country's sovereign wealth fund, would buy shares in three state-owned banks whose shares have fallen steeply - Industrial and Commercial Bank of China, Bank of China and China Construction Bank Corp. China Investment Corp was set up a year ago to manage US$200 billion of China's foreign currency reserves.

The Assets Supervision and Administration Commission, the agency that oversees Chinese state-owned enterprises also said yesterday that the enterprises should buy back their shares from the stock market in accordance with their growth needs. - Reuters