9.3 percent, Shanghai composite index of China erupted on Thursday, achieving its highest single day session gain in six years. Before that, the market plummeted from the peak of 6014 points late last year to less than 3000 points on Tuesday this week.
Miracle in the market
The dramatic scenario happened after the China Security Regulatory Commission, the stock market watch dog of China, and Ministry of Finance announced a plan to slash the stock trading stamp tax from the current level of 0.3% to 0.1%, effective from today. The move had been long anticipated by both investors and market observers, who blamed the market regulators for standing by the excessive market correction since last October.
Sentiment in the market was so high today that the trading volume in Shanghai garnered a staggering RMB 195.6 billion yuan (US$ 27.9 billion), almost doubled that of the previous day. Meanwhile, among the overall more than 1400 listed companies, only three saw their stock price dropped. More than 860 stocks topped the 10% daily increase cap set by the market regulators.
Can the market boom continue?
Given the current economic situation in China, such a frenzy increase won’t be sustainable. In order to cool down the potentially overheating economy of China, the government ushered in a series of measures pinpointing at reining in the oversupply of capital in the market. The measures included increasing interest rate and bank deposit reserve ratio, the capital chain of Chinese companies are getting extremely tighter and tighter.
Global trap for China economy
Moreover, the overall global economic prospect is still perceived to be gloomy, the recession that is sweeping across the US and European countries will in turn hurt the economies of developing countries, those countries rely heavily on trade with the developed ones. China is one example, a lowering demand for products and services from China is set to affect the listed companies’ revenue in 2008, which in turn will lessen the earnings per stock and result in a less-than-expected increase rate for the company.
