China’s Stock Market Boosted After Slashing Stamp Duties by 50%

The Chinese authorities are stepping in with strategies aimed at revitalizing both the capital market and the broader economy. The Ministry of Finance made a pivotal move by announcing a 50% cut in stamp duties on securities transactions. The objective behind this reduction converged at invigorating capital market and enlivening investor confidence.

Supporting this initiative, the China Securities Regulatory Commission (CSRC) followed up with additional measures. These included a deceleration in the pace of IPOs and curbing the amount of major shareholder holdings. Such measures have historical precedence of triggering positive momentum; as noted by Singapore’s OCBC Treasury Research, similar adjustments in the past have often catalyzed a bullish trajectory in China’s A-share market immediately after implementation.

Furthermore, the announcement over the weekend didn't came as a shocker. It was anticipated, especially after Beijing's commitment last month to reinforce its stock market. This commitment was in the shadow of challenges such as the debt crisis in the property market and a less-than-optimal post-pandemic economic recovery trajectory.

To further stimulate the housing market, proposals are underway to alter local government rules. Notably, there's a suggestion to remove the rule that any individual who has previously held a mortgage, even if it's fully settled, should not be deemed a first-time buyer.

Moreover, in a strategic financial move, the People’s Bank of China (PBOC) adjusted its one-year loan prime rate (LPR) to 3.45% from 3.55%. Meanwhile, the five-year LPR remained at 4.20%. This came on the heels of an unexpected decision on 15th August, when the PBoC introduced a 15-bps interest rate cut on 401bn Chinese yuan ($55bn) of one-year medium-term lending facility, marking it down to 2.5%.

These series of economic revamps have resonated positively in the market. For instance, Chinese refining giant Sinopec and state energy titan PetroChina observed a surge in their share prices in Hong Kong, rising by 2.97% and 2.51% respectively. Concurrently, the Shanghai Composite Index and Hong Kong's Hang Seng Index both reflected this renewed investor confidence, jumping by 2.67% and 2.36% respectively.

According to Procurement Resource, China's proactive financial reforms and regulatory measures, aimed at rejuvenating the capital market and broader economy, are demonstrating immediate and tangible results. The blend of cutting stamp duties, recalibrating IPO pacing, and strategic interest rate adjustments by the PBOC are successfully steering market sentiment. This is palpably evident in the rising stock indices and the upbeat performance of major companies like Sinopec and PetroChina.