Chinese stocks jump after Beijing cuts levy for first time since 2008

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Chinese stocks rose on Monday after regulators cut a levy on stock trades for the first time since the 2008 financial crisis and pledged to slow the pace of initial public offerings in an effort to boost investor confidence.

The benchmark CSI 300 index of Shanghai- and Shenzhen-listed stocks led Asian markets higher on Monday, climbing as much as 5.5 per cent before pulling back to be up about 2 per cent. Hong Kong’s Hang Seng index climbed 1.8 per cent.

Elsewhere in the region, Japan’s Topix index rose 1.4 per cent and Australia’s S&P/ASX 200 was up 0.6 per cent.

The sharp gains for Chinese stocks came after the Ministry of Finance announced on Sunday that it would halve the stamp duty levied on all stock trades to 0.05 per cent in order to “invigorate capital markets and boost investor confidence”, the first such cut since 2008.

Separately, the China Securities Regulatory Commission said it would slow the pace of initial public offerings in light of “recent market conditions”. New listings in China often sap liquidity from broader markets and can depress valuations, as retail investors cash out of their holdings to put money towards new share offerings.

“The good news is that we are seeing more easing measures,” Hui Shan, chief China economist at Goldman Sachs, wrote in a note following the moves. “But the bad news is that these measures are still piecemeal, especially in the context of the severe property downturn.”

The intensity of the liquidity crisis in China’s real estate sector was underscored by a fall of more than 80 per cent for Hong Kong-listed shares in struggling developer China Evergrande, which resumed trading on Monday for the first time in 17 months.

The stamp duty cut and IPO slowdown mark the latest attempt by Beijing to reinvigorate Chinese markets, which have completely reversed net foreign inflows spurred in late July by vows of greater economic support from top leaders.

While regulators had hinted at the new measures in an announcement this month, the speed with which they were delivered surprised markets, traders said.

“It’s good in the short term, but who knows how long this rally will last,” said Louis Tse, managing director at Hong Kong-based brokerage Wealthy Securities. “We had a similar rally last month after top officials promised more support, but that has dissipated, and this looks like the same thing. They have to take concrete, sustained action.”

Futures markets tipped the S&P 500 to open 0.1 per cent higher on Wall Street later in the day, while markets in London are closed for a bank holiday.