NEW YORK (Thomson Financial) - U.S.-listed shares of Chinese companies and
exchange-traded funds tracking Chinese stocks surged Wednesday after the country
moved to cut the stamp duty on stock transactions in an effort to restore
investor confidence.
The Bank of New York China ADR Index rallied as much as 4.9% to $511.47.
China-related ETFs all shot higher. The iShares FTSE/Xinhua China 25 Index
Fund (FXI) surged 5.5% to $156.92, while the PowerShares Golden Dragon Halter
USX China Portfolio (PGJ) gained 3.2% to $28.14, and the Claymore AlfaShares
China Small Cap (HAO) rallied 5.9% to $23.80.
China has decided to cut the stamp duty tax to 0.1% from 0.3%, effective
Thursday, state media reported.
The move came after the Shanghai Composite Index has tumbled nearly 50% from
an October peak. Last May, the government raised its securities stamp tax to
0.3% to curb speculation.
Steven Sun, China strategist at HSBC Global Research, said the lower stamp
duty is "equivalent to an injection of over Rmb 100 [billion] liquidity to the
A-share market."
"More importantly, this is set to change A-share investors' mentality to be
more medium- and long-term oriented," Sun said. "Previously (in 2007), as stamp
duty tax was larger than total dividends paid to investors, investing in the
market was a negative-sum game and consequently investors had been forced to be
very short-term oriented."
Among individual ADRs, shares of search engine Baidu.com. rose 0.8% to
$352.69, China Life Insurance rallied 8.5% to $62.60., and China Unicom added
2.1% to $21.44.
Focus Media gained 3.7% to $35.42, while China Mobile rose 4% to $87.96 and
Aluminum Corp. of China surged 10% to $43.17.
PetroChina rose 6.4% to $146.13 and China Finance Online rallied 8.9% to
$16.11.
Wanfeng Zhou
wz/wz/pc
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