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.

1 comment:

ks said...

i concur with the practice of curbbing over heated markets, be it stock or real estate. it is unhealthy to have a rapid growth in anything. if the whole populus is concentrating on making a quick buck on the stock market who is willing to work for meager wages . the chinese government is wise in cooling the market with sensble measures, that is tax to the max just like in canada.