Fri, September 19, 2008
Chinese stocks snapped up three straight days of losses with a sharp rise on Friday after the government stepped in to revive the market, cutting trading tax and promising share buybacks.
The benchmark Shanghai Composite Index jumped 9.07 percent at the opening bell, recovering the steep losses in the previous three sessions due to the shockwaves of the US financial woes.
The rally came after the Ministry of Finance announced overnight that the stamp tax on stock purchases will be scrapped from Friday. Investors interpreted the move as a signal that the government will not let the market fall further.
The State-owned investment agency Central Huijin provided another boost. As the majority shareholder of three major banks, the Industrial and Commercial Bank of China, Bank of China and China Construction Bank, Huijin said it would buy shares of the three lenders in the secondary market.
The aim is to "guarantee the government's controlling stake" and "boost their stock prices", it said in a statement.
At the news, all but one financial shares jumped 10 percent, the maximum allowed by the exchanges. The Industrial and Commercial Bank of China jumped 9.88 percent.
Banking shares alone account for more than 25 percent of the Shanghai Composite Index. Therefore, their performances can partly determine whether the rebound is short-lived or sustained.
On top of the Huijin pledge, the State-owned Assets Supervision and Administration Commission voiced their support for the major State-owned firms to buy back their shares.
Across the globe in Wall Street, the Dow Jones Industrial Average leapt 410 points overnight to 11,019, powered by reports of a US government and Congress plan to soak up bad debts from troubled banks.
