Chinese Stocks Surged as Government Came to Rescue

Think U.S. stock market is miserable? You will feel much better if you look at what happened in Shanghai and Hong Kong since last October. Since reaching the all-time high in October 2007, Shanghai Stock Exchange Composite Index has lost nearly 70% of its value in less one year.

But over night, the China government finally decided to step in to rescue the stock market, providing the boost in confidence Chinese investors have long been waiting for. According to a story on China Daily,

• Ministry of Finance announced that the stamp tax on stock purchases will be removed from Friday;
• State-owned investment agency Central Huijin, who owns the majority of China’s three largest banks, the Industrial and Commercial Bank of China, Bank of China and China Construction Bank, said it would buy shares of the three lenders in the secondary market, a move it says will boost the three banks’ stock prices
• State-owned Assets Supervision and Administration Commission said it supports major state-owned firms to buy back their shares.

As a result, the Shanghai Composite Index surged 9.46% to close at 2,075.09 points. Even more significant, China Daily said all the Yuan-denominated A-shares rose to their daily limit of 10, or 5 percent. Hong Kong Hang Seng Index also saw similar gain, rallying 1,695.27 points (9.61%) to 19,327.73.

Hope this is the beginnig of the recovery of Chinese stocks.

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