Thursday, June 28, 2007
Braising is the New Party Line
Today the Shanghai Composite Index fell more than four per cent today to 3,914.20, on fears that the Central Government will cancel a tax on interest accrued from bank deposits.
It's the latest bid by Beijing to ease the seemingly overheated stock market.
This is a stark contrast from two months ago, when every other university student to grandpa started throwing their money into stocks in the hopes of making a tidy bundle.
They put so much money in, that in May, the amount of bank deposits plunged by 278 billion yuan (US$36.2 billion), and 167 billion yuan in April. This was considered shocking as most Chinese are usually a conservative bunch and prefer to save as much money as they can.
And in the last week or so, the index hovered just past the 4,000 point mark.
But the trend of "stir-frying" stocks has come to an end, with the tripling of the stamp tax on stock transactions.
And now the government is hoping individual investors will instead let their stocks simmer for a while.
It'll be interesting to see if they heed this paternal advice or think they can continue to make a quick buck or two by watching the index board all day.