HSBC is warning that China could see heightened volatility for several months following market falls which started last week.
The benchmark Shanghai Composite index closed 8.2 per cent lower on Monday at 3,670 over concerns the government could bring in more measures to cool the economy. This followed falls last week after the Chinese government raised stamp duty from 0.1 to 0.3 per cent. Offshore Chinese shares, including Hong Kong-listed H shares, were less badly hit.
HSBC Investments Hong Kong chief investment officer Leon Goldfield says the raising of stamp duty indicates that the government is attempting to deter short-term trading.
He says the rise is not significant and the government has not introduced any tax on capital gains. Goldfield says: “It is significant that it is directed at the stockmarket, unlike previous measures which targeted the economy. The measure also appears to target short-term traders rather than long-term investors.”
He says further volatility in the domestic market is prob-able as more investors are likely to take profits. He believes although markets are likely to go through a consolidation, the fundamentals for China remain strong, including economic and earnings growth.
The Chinese government is said to be considering lifting restrictions on local investors investing overseas, which could further reduce pressure on the domestic market.