Chinese stocks plunged more than
eight percent on Monday as jittery investors dumped shares in worries about
further potential governmental moves to dampen the market following a stamp tax
|An investor stands in front of an electronic
board at the stock exchange market in Shanghai June 4, 2007. China's main
stock index tumbled 8.26 ercent or 330 points on Monday to close at
3670.40, adding to big losses suffered last week after the government
hiked the share trading tax to cool speculation. [Reuters]|
The benchmark Shanghai Composite Index lost 8.26 percent to close at
3,670.41 points, adding to sharp falls last week. That marked the biggest drop
since February 27 when the index plummeted 8.84 percent, triggering a
Only 25 out of more than 1,400 stocks in the Shanghai and Shenzhen stock
exchanges rose, while about 800 stocks fell to their daily limit of 10 percent.
Blue chip stocks failed to stay firm and joined the small-capital shares in
the plunge, which analysts said further affected investors' confidence.
Sinopec dropped its 10 percent limit to 13.65 yuan, reversing three days of
The Industrial and Commercial Bank of China lost 8.10 percent to 4.99
yuan, while Bank of China fell 9.25 percent to 5.10 yuan.
Hundreds of small-capital stocks have declined by their daily limit for four
Trading was moderate in both Shanghai and Shenzhen bourses. Turnover in
Shanghai was 145.98 billion yuan, down from more than 200 billion yuan in the
previous sessions, while volume in Shenzhen stood at 74.36 billion yuan.
The decline came as investors remained jittery about speculation on the
collection of capital gains tax and on the abolition of tax on interest accrued
from deposits. Taxation officials have rejected the rumor, but that did not seem
to reassure the investors.
The Ministry of Finance denied an increase in stamp tax on trading on May 22,
but then announced seven days later the tripling of the rate to 0.3 percent from
0.1 percent, triggering a 6.5 percent drop in the Shanghai Composite Index.
China will eventually start to levy capital gains tax on stock trading, said
Hu Bing, an official with the China Securities Regulatory Commission Thursday in
New York, according to earlier reports.
The lack of the duty lead to a widening of the gap between the rich and the
poor, Hu noted. "However, phasing in capital gains tax is a long-term process as
it is a major issue that depends on the development of the market."
Some analysts believed the government would not permit the slide to extend
and the market is about to rebound.
On Monday, three major securities newspapers carried editorials saying the
tax rise was merely aimed at speculators and the market's outlook was still
positive, a move widely seen as regulators' attempt to restore confidence into
Investors seemed to have slowed down the pace of opening new share trading accounts. On Friday, about 227,000 A-share
accounts were opened after 270,000 ones were added Thursday, down from an
average of more than 310,000 in the previous week albeit still at a high level.
However, Thursday saw the number of newly added fund accounts ballooned to
449,000 from about 50,000 on average in the previous week.