Stocks fall amid worries

By Dong Zhixin (
Updated: 2007-06-01 16:05

Chinese stocks fell Friday amid worries about the government's potential further moves to cool the equity market following a stamp tax hike.

The benchmark Shanghai Composite Index lost 2.65 percent to close at 4,000.74 points. The Shanghai and Shenzhen 300 Index fell 3.16 percent to 3,803.95.

Only about 150 out of more than 1,400 stocks in the Shanghai and Shenzhen stock exchanges posted gains, while more than 600 shares nosedived to their daily limit of 10 percent.

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Sinopec proved an unusual bright spot after rising 2.15 percent to close at 15.17 yuan, the third straight increase after the duty hike.

Some other blue chip stocks performed well, offsetting part of the downward pressure on the benchmark index. Chalco, the country's top aluminum producer, rose 4.48 percent to 21.92 yuan. China Merchants Bank gained 1.61 percent to 22.07, while China Life was up 0.22 percent to 37.08 yuan.

Brokerage shares recovered from two days of consecutive sharp losses. CITIC Securities increased 3.16 percent to 55.79 yuan, as Hong Yuan Securities edged up 0.36 percent to 31.6 yuan.

The decline was largely attributed to market fears about further dampening measures. Tuesday night the Ministry of Finance tripled the stamp tax on stock trading, prompting a 6.5 percent plummet in the Shanghai Composite Index.

China's stock market is growing too fast and regulators hope they can develop it in a more stable way, said central bank vice governor Wu Xiaoling on Thursday.

"If the stock market can't operate smoothly, then investors' confidence will be hurt and their consumption will be affected, " Wu said.

The duty hike and Wednesday's drop do not seem to affect investors' enthusiasm. More than 420,000 share trading accounts were opened on Wednesday, including 343,000 ones for yuan-denominated A-shares.

Xia Bin of the Development Research Center under the State Council expect regulators to come up with more macro control measures.

He suggested regulators focus on the supervision of listed firms and crack down on insider trading and other illegal manipulating activities, as well as increase the supply of quality stocks and other financial products.

Xia also advocated the abolition of tax on interest accrued from deposits as an effort to discourage the transfer of bank deposits to the equity market. But a State Administration of Taxation official said Wednesday China has no plans to abolish the interest tax in the near future.

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