Stamp Tax; Say What?
From the AP comes news of the new Chinese “stamp tax” on trading:
BEIJING (AP) — China’s move to raise a tax on share trades, aimed at slowing a boom that could lead to a possible market bubble, seems to have worked, at least for now. The main Shanghai Composite Index tumbled 6.5 percent to 4,071.27 Wednesday after hitting a record high on Tuesday. The Shenzhen Composite Index for China’s smaller second market fell even more, closing down 7.2 percent at 1,199.45. The decline in Chinese shares hit other markets, too, although not as dramatically as on Feb. 27, when investors around the world flinched from a nearly 9 percent slide in the Shanghai index. The retreat in Chinese shares came after the Finance Ministry tripled the “stamp tax” on stock trades from 0.1 percent to 0.3 percent, effective Wednesday. The ministry was trying to “cool (the) stock market,” the official Xinhua News Agency said. “This policy change reveals the government’s concern about a possible stock market bubble,” said Citigroup economist Minggao Shen, describing the tax hike as Beijing’s first formal move to cool the boom. “The market didn’t know what the government was thinking until now.” Despite the drop, Shanghai’s benchmark index is still up 52 percent for the year, following a 130 percent jump in 2006.
Why doesn’t the AP reporter have the guts to say that sounds nutty as hell? A stamp tax? Picking bubbles? Deflating them a little, but not too much? All organized by typical government busy bodies? But perhaps they have figured out, perhaps this all ends well. I smell the same kind of aroma that took over America up until March 2000.
