Stocks Plunge 8% in China, Benchmarks Down 16% Since Wednesday

Bloomberg reports an editorial in the state-owned China Securities Journal mentioned "weak sentiment" behind volatile trading in "unsustainable" rallies, as stock price appreciation was "extremely unusual" and highlighted "structural bubbles." This, in addition to rumors of a possible hike in capital gains tax, sent Chinese stocks lower from the open, to close off by 8%. Chinese benchmarks have lost around 16% since last Wednesday -- losing $350 billion plus in market cap -- when the government increased the "stamp tax" on stock trading. A newspaper report said Beijing is set to announce an increase in the supply of land in order to slow real estate gains. Also, there was talk a 20% tax on savings deposit interest may be eliminated in order to limit outflow to stocks. The CSI 300 Index, which tracks A-share listings on both the Shanghai and Shenzhen Exchanges, fell 7.7% to 3,511.43. B-shares in Shanghai lost 7.8% vs. 6.6% in Shenzhen. The rest of Asia however, mostly traded to the upside, including the Hang Seng up 0.6% and H-shares up 0.4%, led by a 1.2% gain by the Seoul Composite.

Sources: Bloomberg
Commentary: Anatomy of a Chinese Bubble: A Checklist For Spotting Bubble Tops • China ETF Safety Net: Protect Against Downside Risk • Morgan Stanley China Closed End Fund: NAV Up While Market Price Lags • Shanghai Drops 6.5% on Trading Tax Hike, Asia Trades Lower, But Stable
Stocks/ETFs to watch: Morgan Stanley China A Share (CAF), iShares FTSE/Xinhua China 25 Index (FXI), PowerShares Gld Drg Haltr USX China (PGJ), The China Fund (CHN), The Greater China Fund (GCH), JF China Region Fund (JFC), First Trust ISE ChIndia Index Fund (FNI)

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Comments

[Nidhi Kadalbal:]

It will be interesting to watch Shanghai stock movement since the selloff from late february. And the name of the game today is "resiliency".

Creating Wealth

2007 Jun 04 04:03 PM

[info:]

What's notable, even remarkable, is that the sell-off was only confined to the Chinese A & B-shares. Nothing like Feb. 27 happened. Is this resilient or complacent? Only time will tell.

2007 Jun 04 04:56 PM