[ 2007-06-04 13:45 ]
Chinese stocks plunged as jittery investors dumped shares in
worries about further potential governmental moves to dampen the market
following a stamp tax hike.
The benchmark Shanghai Composite Index finished the morning trading 4.59
percent lower at 3,816.97 points, after hitting an intraday low of 3,697.12, the
lowest level in weeks.
Blue chips ended the strong performances after the stamp tax increase.
Sinopec dropped 6.26 percent to 14.22 yuan, reversing three days of straight
The Industrial and Commercial Bank of China lost 4.42 percent to 5.19 yuan,
while Bank of China fell 4.27 percent to 5.38 yuan.
CITIC Securities was a bright spot after rising 2.12 percent to 56.97 yuan,
erasing part of the losses incurred on the two days after the stamp tax was
Investors were still 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 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
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."
Investors seemed to have slowed down the pace of opening new share trading
accounts. On Thursday, 270,000 A-share accounts were opened, 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.