Chinese Stocks Rally After Beijing Moves to Boost Market – August 28, 2023

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Stocks in mainland China soared on Monday, after the government cut a tax on trading and said it will take more steps to revive its sagging capital markets.

The move is an attempt to address a slide in Chinese stock prices this year, as investors have dumped shares amid worsening economic newsand big rallies elsewhere. China’s benchmark CSI 300 Index was down around 4.2% this year before Monday’s open.

The CSI 300 and the Shanghai Composite Index both moved 2.3% higher in morning trading, putting them on track for one of their best days this year. Hong Kong’s Hang Seng Index, which includes the shares of many Chinese companies, was up 1.7%.

But the measures don’t fully address investors’ concerns, said Jason Lui, head of Asia-Pacific equity and derivative strategy for global markets at BNP Paribas. Investors are still looking for more concrete steps from the government to boost the economy, he added.

“If they still feel bearish on the economic recovery of China, then it may be difficult to convince them to buy shares just because of these technical changes,” Lui said.

China’s Ministry of Finance on Sunday said it would halve stamp duty on securities transactions, to 0.05%, starting Monday, in an effort to spur trading and boost confidence. It was China’s first stamp-duty cut since 2008. 

Stamp duty is the biggest expense for stock traders in China, and the cut will reduce the cost of trading A-shares by 35% to 40%, according to analysts at Citi. However, the market impact of cuts to stamp duty tends to peak within 15 days and disappear after six months, the Citi analysts said.

Meanwhile, the country’s securities regulator said it would take steps to limit new listings, something that could help balance supply and demand, and allow more margin lending.

The securities regulator will also block controlling shareholders from selling stock in listed companies that haven’t paid dividends in the past three years, or are trading below their initial-public-offering prices or net asset values.

China’s stock market has been hurt this year by a faltering economy and a slumping property sector. Global investors have become net sellers of Chinese shares, with outflows from Chinese domestic stocks by foreign institutional investors using a popular stock trading link reaching $10.2 billion so far in August, according to Wind data.

Foreign investors were net sellers of Chinese domestic stocks for 13 consecutive days this month, the longest streak of selling since November 2015, when the market was recovering from a historic crash.

China’s latest measures to boost its stock market follow a statement in late July by the Politburo, the Communist Party’s top policy-making body, which pledged to “invigorate the capital market and boost investor confidence.” But until last Sunday, the country’s securities regulator had stuck to more-marginal measures, including considering longer trading hours and encouraging listed companies to improve shareholder returns.

The CSI 300 and the Shanghai Composite Index were both more than 5% higher in premarket trading, but their gains softened after the open.

Separately, Hong Kong’s chief executive, John Lee, said on Sunday that the government was considering setting up a task force to boost stock-market liquidity. Lee said the financial secretary will share more details about the task force this week. The city’s benchmark Hang Seng Index officially entered bear-market territory earlier this month.

Shares of China Evergrande Group, the beleaguered property developer, started trading in Hong Kong on Monday morning after a 17-month halt. They were down 78% in midmorning trading.

Evergrande posted a net loss of $4.5 billion for the first half of this year, although that was an improvement from the same period last year. It filed for chapter 15 bankruptcy in New York earlier this month, bringing the restructuring of its roughly $19 billion foreign bonds closer to the finishing line.

Hong Kong-listed shares of electric-vehicle maker XPeng jumped 14% after the company said it would acquire a smart auto development business from ride-hailing giant Didi Global for $744 million.

Write to Rebecca Feng at rebecca.feng@wsj.com and Dave Sebastian at dave.sebastian@wsj.com