China cuts transaction fees for stock trading to boost market

Aug. 3 (Bloomberg) -- Chinese regulators, seeking to arrest a 14 percent slide in the nation’s stock market since this year’s high on March 2, reduced transaction fees on equities trading by 20 percent.

The reduction will take effect Sept. 1 and save investors 600 million yuan ($94 million) in transaction-related fees in the final four months of the year, the China Securities Regulatory Commission said on its website yesterday. Separately, the official Xinhua News Agency said that China is also considering a cut in stamp duty on share trading.

The reduction follows a July 31 announcement by the Communist Party’s Politburo that pledged to continue adjusting policies to ensure stable economic growth. The Securities Times said in a front-page commentary the same day that the government should introduce measures to stabilize the stock market and boost investor confidence.

“The government wants to be seen doing something politically,” Andy Xie, an independent economist who was formerly Morgan Stanley’s chief Asia economist, said yesterday in a telephone interview. “There’s a confidence crisis in the stock market and there’s a perception that the stock market is a trap and doesn’t reward investors.”

China’s benchmark Shanghai Composite Index fell 5.5 percent last month, the worst-performing market in Asia, on concern an economic slowdown is deepening and as Europe’s debt crisis hampers exports to China’s biggest trading partner. The nation’s economy grew 7.6 percent in the second quarter, the slowest pace since 2009. Profits for industrial companies fell 1.7 percent in June, declining for a third straight month.

CSRC Reforms

The lower fees are the latest measure to boost investor sentiment. The CSRC in recent months urged listed companies to pay more cash dividends and changed how initial public offerings are priced. Chinese publicly traded companies, especially those whose stock prices are below their book values, have obligations to buy back shares, the China Securities Journal said yesterday, citing an unidentified CSRC official.

“It’s one piece of good news out of all the bad news that has come out,” said Hao Hong, Hong Kong-based managing director for research at Bocom International Holdings Co. “It won’t change anything for investors unless there is a change in economic growth and earnings growth.”

The People’s Bank of China has cut interest rates twice since early June and lowered lenders’ reserve requirement ratio three times starting in November as part of the government’s efforts to boost credit and support economic expansion.

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