China Throws a Lifeline - Keeping the illusion alive

[Anonymous]

blah blah blah - can you say illu-sion

http://www.thestandard.com.hk/news_deta ... con_type=3

Friday, September 19, 2008


Beijing yesterday announced measures to prop up ailing stock markets, saying it will scrap stamp duty on stock purchases and buy shares in the top three commercial banks in the secondary market to revive investor confidence.

The central government said the measures, along with allowing state- owned enterprises to repurchase shares in the market, will be effective today.

The speculation that the government was on the verge of announcing new market-stimulating measures drove Chinese financial plays higher yesterday afternoon in Hong Kong trading.

Both the mainland and Hong Kong markets showed a V-shape rebound before market close and ahead of the news, led by Industrial and Commercial Bank of China (1398), Ping An Insurance (2318) and Bank of Communications (3328).

After the close and in wake of the coordinated move by Western central banks to pump extra capital into their markets, the China Securities Regulatory Commission said the 0.1 percent stock transactions duty will be axed for purchases and levied only on sales.

Central Huijin, the investment arm of China Investment Corporation, will also boost its stakes in the top three state-owned commercial banks to shore up confidence.

It currently holds 35.3 percent stakes in ICBC, 67.49 percent in Bank of China (3988) and 59.12 percent in China Construction Bank (0939).

The State-owned Assets Supervision and Administration Commission asked SOEs to promote the "stable development of capital markets by repurchas
ing shares."

"The publicly listed SOEs should be the role model in the market, they could gain support from us in repurchasing of shares," said SASAC chairman Li Rongrong.

After plummeting 7.7 percent in early trade, the Hang Seng Index recovered most of its losses for the day to close at 17,632.46, down 4.73 points, or 0.03 percent, while the Hang Seng China Enterprises Index ended at 8,633.73, down just 0.4 percent.

The Shanghai Composite Index fell 1.7 percent, or 33.21 points, to end at 1,895.837. Its Shenzhen counterpart lost 2.3 percent, or 12.855 points, to 547.095.

"This is part of the measures to save and stabilize the market," said JPMorgan chief China economist Frank Gong. "The market has fallen too much. There will be more measures to support the economy, like fiscal stimulus and easing of monetary policy."

Hong Kong retail investors went to hell and back as shares plunged to a 26-month low in the morning before clawing back more than 1,300 points in the afternoon. "It was like a miracle," said a retail investor in her fifties.

"I thought I was going to lose a lot, but after the injections, the market was okay." Investors who gathered at a branch of Prudential Brokerage in Central cheered as their holdings recovered.

Wall Street rallied in early trade, with the Dow Jones Industrial Average rising 108.94, or 1 percent, to 10,718.60. Britain's FTSE 100 index rose 0.9 percent by mid-afternoon.

In Hong Kong, punters were even more optimistic. "It's okay, said a punter surnamed Chan in his sixties. "I lived through the 1973 market collapse, and this time, the market is much more sophisticated. I think I can handle it this time."