Stocks News
- Govt. not planning tax on stock-trade gains
Date: 1-Mar-2007 Sources: (Shenzhen Daily)
THE government is not planning to tax stock gains, the Shanghai Securities News reported yesterday after rumors about such a tax drove shares down 8.8 percent Tuesday.
The slide upset investment markets worldwide.
Officials at the Finance Ministry and tax authorities denied the rumors, saying the government was not planning to levy such a capital gain tax, the newspaper said.
The government stopped taxing gains from stock trade in 1994 to promote the development of its stock market, the newspaper said.
Stocks plunged nearly 9 percent Tuesday, erasing about US$140 billion of value in their biggest fall for a decade, amid fears that authorities would crack down on the speculation that had driven shares to record highs, analysts said.
The tumble came a day after the main index jumped to an all-time high, bringing its gains for this year to 14 percent. The market soared 130 percent last year, making it the world's best-performing major market.
The market was hit by several negative rumors in late trade, including talks that authorities would take strong steps to cool speculative activity.
There was talk of an imminent interest rate hike after poor inflation data in the past two months. The central bank raised bank reserve requirements Sunday.
Many traders attributed the plunge mainly to hectic speculation. Ahead of next week's meeting of the National People's Congress in Beijing, investors had bid up stocks on hopes that the government would produce market-friendly policies, including corporate tax reform and steps to boost rural incomes.
In an apparent bid to soothe investors, a front-page article in the China Securities Journal, one of three major domestic securities newspapers, said Tuesday's falls were unlikely to reverse the bullish trend of the stock market.
Citing analysts, the article said Tuesday's losses were driven by various rumors, from interest rate hikes to a planned crackdown on illicit fund flow into the stock market. It did not mention the capital gain tax rumor.
Central bank governor Zhou Xiaochuan was quoted in domestic media yesterday as saying that the government was still fighting excess liquidity in its banking system, but the link between stock prices and the liquidity problem was not strong. The reports did not elaborate.
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