China lowers stamp duty on stock trades, tightens IPOs to woo investors

According to a Bloomberg report citing the Chinese ministry of finance, the levy charged on stock trades will fall from 0.1% to 0.05% as of August 28.

As per the report, China’s latest move is to “invigorate capital markets and boost investor confidence.”

The China Securities Regulatory Commission (CSRC) has cited recent market conditions as its rationale for slowing the pace of IPOs.

According to the CSRC’s new rules, restrictions will be set on the frequency and size of refinancing for companies which continuously report financial losses and whose stock prices have fallen below IPO levels or net asset levels.

However, property developers have been exempted from the rule. 

“Authorities have been trying to disspell worries about the economy triggered by a slumping property market, trust defaults and weak consumer spending,” the Bloomberg report.

According to Bloomberg data, foreign investors sold mainland China stocks on a net basis for 13 consecutive sessions through Wednesday, the longest stretch ever.

Earlier this month, Chinese authorities had urged pension funds, large banks and other big domestic financial institutions to increase stock investments to support the market. 

The regulators have also reduced handling fees on stock transactions, allowed mutual fund managers to increase purchases of their own equity funds and encouraged companies to do more share buybacks, said the report. 

The stamp duty in China was last cut in April 2008. It was reduced to 0.1% to support the market. 

In May 2007, China had raised the rate to 0.3% to cool a rally that was drawing more than 300,000 new investors a day.  

• Margin ratio for margin trading has also been cut to 80% from 100%, effective from market closing on September  8.
• As per the rules, for companies with stock prices fallen below IPO levels or net asset levels, or which haven’t paid cash dividends or which are paying a total cash dividend lower than 30% of average net profit of the recent three years, the controlling share holders and de facto controlling holders will not be allowed to cut holdings in the secondary market. 

(With inputs from Bloomberg)

Updated: 27 Aug 2023, 08:11 PM IST