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Re: JPY- long term !!
By Chris Oliver
China's Shanghai Composite Index tumbled as much as 7.4% Wednesday after the government unexpectedly tripled duties charged on stock trades, the latest in a series of official steps taken to cool speculative activity and head off what many believe is a runaway equity-market bubble.
The Shanghai market benchmark, which tracks Class A and Class B shares, was down 6.6% at 4,050.50 late in the day's session marked by volatile trade. The Shanghai B share index, reflecting shares denominated in foreign currencies, was down 9% at 302.95.
"What we are seeing is mainly a response to the government's action to raise the stamp duty," said Y.K. Chan, fund manager with Phillip Asset Management in Hong Kong.
Under the stamp-duty decision, tariffs on mainland stock trades will rise to 0.3% from 0.1% effective Wednesday, the Ministry of Finance said in a midnight statement released through the official Xinhua News Agency. The move, which comes a day after Shanghai's main index set a new high, was approved by the top level of China's government, the State Council, and is aimed at promoting the healthy development of the country's securities markets, Xinhua said.
Shares of brokerage companies were among the most heavily traded issues, a sign of worries that the tariff hike would tamp down trading volume and cut into earnings. Shares of Citic Securities plunged its 10% daily limit.
With its rise on Tuesday to an all-time high of 4,334.27, the Shanghai composite had soared 62% this year. It has more than quadrupled since the beginning of the market's dramatic rise in mid-2005.
The plunge was reminiscent of a sell-off in February that came after a top Beijing economic official made comments that pointedly warned of authorities' concerns about Chinese investors' feverish market speculation.
Regional responses
But so far at least, Asia's other markets didn't seem concerned on Wednesday. Key indexes in Thailand and India posted modest gains while South Korea's notched another record close. Japan's Nikkei 225 Average ended lower amid broad-based selling.
"I don't think it will kill the bull market," said Paul Cavey, chief China economist for Macquarie Bank. "They (mainland authorities) are trying to do everything they can to slow things down, but with bank interest rates so low, and the exchange rate so undervalued, it's very difficult to see how asset prices will slow down anytime soon."
Market participants said Beijing's decision on the tax increase was partly a trial balloon to test market sentiment about how far it could go in reining in investor hype.
"What the authorities are looking for really is the announcement effect more than anything else," said Garry Evans, regional equity strategist for HSBC in Hong Kong.
"Authorities in China are trying to get this market to achieve a soft landing without bursting the bubble," he added. "There are obvious things they could do to make it collapse, like introducing capital gains tax, but they worry about the impact on social stability if they were to really cause a crash, so they have to try and massage it down a little bit, and that's always a very tricky thing to do."
He added that it was "unlikely" a correction in China's stock markets would have contagion effects on global equities as the nation's financial system remains mostly off limits to foreign investors.
Shares of CNOOC (CEO) and PetroChina (PTR) led the energy sector lower after crude oil prices tumbled more than 3% in New York trade.
Hong Kong's Hang Seng Index was down 1.1% to 20,253.17. The Hang Seng China Enterprises Index, or Hong Kong-listed shares in mainland companies, shed 2.5% to 10,349.735
In share trading, China Construction Bankfell 2.46% while Industrial and Commercial Bank of Chinashed 1%.
Decliners also included China Mobile (CHL) , shares of which were down 1%.
Nikkei dips
In other regional action, Japan's Nikkei 225 Averageended 0.5% lower, shedding 84.30 points to 17,631.56. The broader Topix index was down 0.2% at 1733.75.
Japan's industrial production slipped a seasonally adjusted 0.1% in April after falling 0.3% in March, the Ministry of Economy, Trade and Industry said Wednesday shortly before the market opened. The April result came in below the average 0.5% increase forecast by economists surveyed by Dow Jones Newswires and Nikkei News.
Shares of Fast Retailingwere up 2.8% after brokerage Goldman Sachs upped the operator of the Uniqlo casual clothing wear chain operator to "neutral" from "sell", citing strong sales and improved brand recognition among consumers.
Shares Sumitomo Metal Industriesclimbed 1.9% after the steelmaker said Tuesday it will buy back up to 110 million shares, or up to 70 billion yen ($575.88 billion) in value before Dec. 20. Sentiment was also boosted by a Nikko Citigroup report which said the company looks undervalued at current levels and lifted its target price on the share to 850 yen.
Automotive shares were among the day's decliners in Tokyo. Toyota Motor Corp. (TM) eased 1% while Honda Motor Co. (HMC) lost 0.7%.
South Korea's Kospi Index added 0.1% to 1,662.72, Australia's SP/ASX 200 slipped 1.2% to 6,243.4 and New Zealand's NZX-50 shed 0.7%. Taiwan's Weighted Price Index eased 0.4% and Singapore's Straits Times Index dropped 1.3%.
India's Bombay Sensex was up 0.4% and Thailand's SET Index added 0.7%. Benchmarks in Malaysia and Indonesia reversed early gains, falling into negative territory in late trade. The KLSE Composite was down 0.8% and the JSX Composite fell 0.5. %.
The dollar was trading at 121.42 yen, compared with 121.63 yen in New York late Tuesday.
In after-hours trading Wednesday, crude oil for July delivery rose 14 cents to $63.29 a barrel. The benchmark contract fell 3.1% to $63.15 a barrel in Tuesday trading on the New York Mercantile Exchange. Analysts said the crude prices were pressured after Nigeria's newly inaugurated president called for an immediate cessation of hostilities in the Niger Delta region, easing concerns over nation's oil production output
U.S. stocks finished higher Tuesday, as investors returning from the three-day Memorial Day holiday weekend were cheered by deal news, including a $95.5 billion offer for Dutch bank ABN Amro. The Dow Jones Industrial Average (DJI) gained 14 points to close at 13,521, while the Nasdaq Composite (RIXF) gained 14.9 points to end at 2,572.
(END) Dow Jones Newswires
May 30, 2007 04:00 ET (08:00 GMT)
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