Thanks Doc! I feel a lot better now....

What a day China markets experienced today with investors and funds cheering with a big "stamp" of approval! The SSEC (Shanghai Composite) closed at 3,583 points with a gain of 305 points or 9.3%. Intra-day high was 3,593 points or 9.7%. At least 80 stocks climbed to the 10 percent daily limit.Counters like Ping An, Shanghai Pudong Development Bank and Sinopec flies up more than 7% while Citic, China Merchants Bank and Baoshan Iron Steel hits the 10% limit up prices. The jump came after the government announced late Wednesday that it was cutting a stamp tax on share transactions to 0.1 percent from 0.3 percent effective today, reversing a move it made last May when it was seeking to cool surging stock prices – the index rose by 141 per cent from February to October 2007 which touches slightly above 6,000 points. The rally also draws in more than 300,000 new investors accounts in a single day.

Only last weekend the Chinese Government/Authorities aka "Doctor" announced that shareholders selling more than 1 percent of a stock within a month must do so in single trades, keeping the transactions off the open market to support equity valuations. It seems the Authorities believed that the 3,000 points is an oversold position and this allowed them to release further the second "booster jab" to the market. This latest move by the Authorities is another positive and aggressive move, although short term , to encourage investors to return and calm the market or rebuild confidence to a market that had fallen by more than a half since it peaked six months ago. As mentioned in my earlier post (go here), China needs such intervention to spark of buying catalyst in its markets. Generally, the economic environment - higher inflation and tighter monetary policy is still the main concern of the Authorities. How far the market will rise depends on whether the government will successfully curb inflation and avoid slowing economic growth too much. In the long run, how companies’ earnings fare will determine market directions. An interesting point to note is that Yuan is expected to strengthened further and as such, hot monies will probably drive the stock markets further soon. Like it or not, I believe the Authorities, in the months to come will be intervening further to boost the market confidence and morale of the people as the nation inched towards the celebration of its success in organising and participating in the Beijing Summer Olympics on 08 August 08. Let's face it, the host country will not want the world to see sad and grim looking faces of China on TV as the Olympics begins.

* Can this latest 'stamp duty' boost by the Chinese Authorities be able to lift the markets higher? Already this year, the Shanghai market itself has plunged more than 35% and is the second worst performing market in the world. It has lost about US1.9T in market value...about the size of Canadian or German stock markets or 6x of Malaysian market.