China cuts stock trading tax, tightens public offerings to boost the market

China cuts stock trading tax, tightens public offerings to boost the market

(Bloomberg) — China lowered stamp duties on stock trading for the first time since 2008 and pledged to slow the pace of initial public offerings, among a series of new measures to lure investors into the ailing stock market.

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The Ministry of Finance said in a statement on Sunday that the tax imposed on stock trading will be reduced from 0.1% to 0.05% as of August 28, in a move aimed at “revitalizing capital markets and enhancing investor confidence.”

The China Securities Regulatory Commission cited “recent market conditions” as a rationale for slowing down the pace of IPOs, without providing details on how to do so. The SEC also said that limits will be placed on the frequency and size of refinancing for companies that consistently report financial losses and whose share prices have fallen below initial public offering or net asset levels. She added that real estate developers are exempt from this rule.

The authorities are trying to allay concerns about the economy caused by a sluggish real estate market, lagging confidence and weak consumer spending. Data compiled by Bloomberg showed that foreign investors sold mainland China stocks on a net basis for 13 consecutive sessions through Wednesday, the longest period ever.

The CSI 300 index fell about 4% in 2023 after consecutive annual losses, and is about six percentage points below the performance of the broader measure of Asian stocks. This month, the authorities urged pension funds, big banks and other major local financial institutions to increase their equity investments to support the market.

Regulators have also lowered handling fees on stock transactions, urged mutual fund managers to increase purchases of their stock funds, and encouraged companies to do more share buybacks.

The last time China cut the stamp duty was in April 2008, when it lowered it to 0.1% to support the market after the downturn, which led to higher prices the following year. The previous year, in May 2007, he raised the interest rate to 0.3% to smooth out a rally that was attracting more than 300,000 new investors daily.

Other highlights of the measures announced by the CSRC on Sunday:

  • The margin trading percentage has been reduced to 80% from 100%, effective from the market close on September 8th.

  • For companies whose share price has fallen below IPO levels or net asset levels, that have not paid a cash dividend or that have paid a total cash dividend of less than 30% of average net profit for the last three years, controlling shareholders and D.L.N. Those with effective control are allowed to reduce their holdings in the secondary market

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