Pulling out more stops to boost A-share market

The Ministry of Finance yesterday said it will cut the stamp duty charged for sales and purchases of stock to 0.1% of transaction value, from 0.3%. Just last year, the stamp duty had been raised to 0.3% from 0.1%, to prevent excess speculation in shares. This is only the latest in a series of recent measures aimed at supporting the A-share market. These other measures included limiting sales of large share amounts to block sales transactions and limiting new listings of red-chips on the A-share market.

It is unclear how sustainable the impact of the cut in stamp duty will be for the A-share market. While the previous measures had a positive impact on the market, they have not sparked a large, sustainable rally as of yet. This latest move could indicate that the government is quite determined to at least prevent the market from falling much further and it could even indicate that the government wants to generate a rally. Some investors had previously speculated that a stock market rally would occur prior to the Beijing Olympics in August. It is possible those investors get their wish, especially if the government has more market-supporting measures up its sleeve.