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China released a series of measures including a stamp duty cut in the latest attempt to boost the struggling stock market as a recovery sputters in the world’s second-biggest economy.
China will cut the stamp duty on stock trading by 50%, from 0.1% to 0.05%, effective August 28, in order to “invigorate the capital market and boost investor confidence,” the Ministry of Finance said in a statement on Sunday. That’s the first reduction of the stamp duty on stock trading since 2008.
On the same day, the China Securities Regulatory Commission (CSRC), the country’s top securities regulator, said that it will temporarily slow the pace of initial public offerings (IPOs), citing the current market situation, in order to promote a dynamic balance between the fundraising and investment.
Regarding large refinancing by listed financial institutions and large-cap companies in other sectors, the CSRC will conduct a pre-communication mechanism about necessity and timing of the fundraising, it said.Â
The CSRC will “appropriately restrict the intervals and the size” of refinancing by companies whose share prices have dropped below IPO prices, P/B ratio below 1, posted continuous operating losses and the proportion of financial investment is too high, it said, adding that listed real estate companies won’t be subject to the restrictions.Â
The regulator vowed to guide listed companies to set reasonable size of refinancing, require the funding raised to be invested in their main businesses and strictly restrict diversified investment with the funding.
In addition, the CSRC will also tighten the restrictions on share reductions by listed companies’ major shareholders.
For listed companies whose share prices have dropped below IPO prices, whose P/B ratio has dropped below 1, that didn’t declare any cash dividend payouts in the recent three years or whose total cash dividend payouts in the recent three years were lower than 30% of the average annual net profit, their controlling shareholders, actual controllers and the largest shareholder are not allowed to conduct share reductions in the secondary market, it said.
The CSRC will strictly control the size of share reductions by the companies’ other shareholders, guide them to make reasonable arrangements for share reductions based on market situation, and encourage controlling shareholders, actual controllers and other shareholders to make promises not to cut shareholdings or extend the lock-up period, it said.Â
Furthermore, China’s three stock exchanges will lower the margin financing requirements in a move to boost stock market activities.Â
The Shanghai Stock Exchange, the Shenzhen Stock Exchange and the Beijing Stock Exchange will lower the margin requirements for their stock trading to 80% from 100%, effective from market close on September 8, according to a statement released by the CSRC.
Chines authorities have been taken a series of measures to boost the sluggish stock market. The blue-chip CSI300 Index has dropped to nine-month lows, and is down 11% from an April peak as hopes of a robust post-COVID economic recovery fizzled out and policymakers showed reluctance to roll out stronger stimulus. By comparison, MSCI’s global stock index is up 11% so far this year.
Last week, the CSRC held a meeting with the national security fund, large banks and large insurance companies to have discussions about guiding medium and long-term capitals into the stock market. The CSRC also met with representatives from top Western asset managers on Friday to reassure them about the country’s economic prospects, Reuters reported citing sources.
The CSRC on Aug. 18 unveiled a package of proposals including supporting share buybacks to support the country’s $11 trillion stock market. The regulator also said stabilising the stock market was a priority. “Without a relatively stable market environment, there’s no basis for reviving the market and lifting sentiment.”