|An investor holding a pair of chopsticks has
his lunch in front of an electronic board at the stock exchange 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.
Chinese stocks rebounded in wild fluctuations on Tuesday, erasing part of the
losses incurred in the last few days since the stamp tax hike on stock trading.
The benchmark Shanghai Composite Index gained 2.63 percent to close at
3,767.10 points. At one point in the morning, the index dived to as low as
3,404.15, a decrease of 21.57 percent from the record high set on May 29.
But the index picked up gradually in the afternoon trading and managed
to finish in positive territory.
Tuesday's morning's fall followed an 8.26 percent drop in the previous
session and a 6.5 percent fall last Wednesday. The tumbles came after the
Ministry of Finance tripled the stamp duty to 0.3 percent last Tuesday, spooking
many investors into panic selling.
In a move seen as an attempt to restore investors' confidence, the China
Securities Regulatory Commission (CSRC) has approved four new funds that will
invest in Chinese stocks, according to an earlier report. Each of the funds
would be allowed to raise as much as $1.3 billion for investment in Chinese
"The approval of new funds has sent out a clear signal," said Galaxy
Securities chief fund analyst Hu Lifeng, adding the speed at which the new funds
were issued is an effective measure to adjust capital supply in the market.
When the market is in a downturn, regulators can increase the supply of new
funds to hike capital inflow, which in turn stabilizes prices and boosts market
confidence, Hu explained.
As another move to return stability to the market, the CSRC has asked the
funds in the market not to engage in rapid buying and selling, but to stick to
the principle of value investment.
Blue chip stocks led Tuesday afternoon's recovery. Sinopec, Asia's largest
refiner, gained 6.15 percent to close at 14.49 yuan per share after falling its
10 percent daily limit on Monday. Chalco, the country's biggest aluminum
producer, soared 7.65 percent to 21.39 yuan.
China Life gained 2.65 percent to 34.86 yuan, while the Industrial and
Commercial Bank of China rose 1.80 percent to 5.08 yuan, followed by Bank of
China, rising 1.76 percent to 5.19 yuan.
Trading was more active than Monday. Volume in the Shanghai Stock Exchange
hit 179.21 billion yuan compared with Monday's 145.98 billion yuan, while
turnover in Shenzhen stood at 93.53 billion yuan, up from 74.36 billion yuan on