China's Stocks Decline on Speculation of New Cooling Measures
By Zhang Shidong
June 1 (Bloomberg) -- China's shares fell, erasing earlier gains, on concern there will be new efforts to cool the market, including a capital gains tax, after a tripling of the duty on securities trades failed to deter new investors.
About 100 stocks, or a third of the CSI 300 Index's members, fell by the 10 percent daily limit, including Bright Dairy & Food Co. and Dongfeng Automobile Co.
``Rumors of a capital gain tax and interest rate increases are driving down the market,'' said Charlie Chen, who invests $1 billion in Chinese stocks for Fortis NV.
The CSI 300 slid 124, or 3.2 percent, to 3803.95 at the close, after earlier climbing as much as 2.2 percent. Account openings at brokerages exceeded 400,000 for the third time in a row on May 30, when stamp duty was raised to 0.3 percent and the CSI 300 plunged 6.8 percent. The benchmark rose 1.1 percent yesterday.
The central bank this month raised interest rates for the second time this year, encouraging people to save rather than invest in stocks.
Bright Dairy, China's biggest yogurt maker, tumbled 1.43 yuan to 12.83. Huadian Power International Corp., the country's third-largest publicly traded power producer, slid 1.11 yuan to 9.98. Dongfeng, which makes light trucks in China with Nissan Motor Co., plunged 0.87 yuan to 7.80.
``Investors, particularly individual ones, are worried about what else the government will do to curb the market,'' said Fan Dizhao, who helps manage about $1.8 billion at Guotai Asset Management Co. in Shanghai. ``This is a time of uncertainty.''
The government might introduce further measures, such as launching index futures, banning day trades and speeding up the sale of state-owned shares if the market doesn't cool down, Citigroup Inc. strategist Lan Xue said in a research note.
The CSI 300, which tracks yuan-denominated A shares listed on China's two exchanges, dropped 4.6 percent this week, the first decline in 11 weeks. It's up 86 percent this year, the most among 90 global benchmarks tracked by Bloomberg.
Weekly Fall
``New investors don't seem to care about the increase in the stamp duty,'' said Yan Ji, an investment manager at HSBC Jintrust Fund Management Co. in Shanghai, which manages $517 million.
The Shanghai Composite Index, which tracks the bigger of China's stock exchanges, lost 2.7 percent to 4000.74. The Shenzhen Composite Index, which covers the smaller one, slid 5 percent to 1128.57.
Elsewhere, Panzhihua New Steel & Vanadium Co., the world's third-biggest producer of vanadium steel used in high-speed railroads, plunged 1.36 yuan, or 10 percent, to 12.23.
The parent company intends to ``go public through the vanadium unit,'' Panzhihua Steel said in a statement to the Shenzhen Stock Exchange today.
To contact the reporter on this story: Zhang Shidong in Shanghai at [email protected]
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