It’s not true and we’re going to smack you if you keep talking about it, was the response by China’s securities regulator to rumors that the government was going to throw cold water on the current stock market rally.
Rumors floating around social media sites Thursday said that the government was planning on raising stamp taxes, reinstating the capital gains tax and limiting margin financing.
The China Securities Regulatory Commission (CSRC) on Friday released a statement that said the tax rumors were fictitious, and it will punish those who spread the rumors, according to Reuters.
Asia Unhedged, who remains quite bullish on the Chinese stock market, finds this to be good news. Obviously, any attempts to manipulate the market would be bad. On top of that, Asia Unhedged does not think the market is overheated, but rather there is much more room to grow.
In addition, previous attempts to manipulate the markets with a stamp tax have only temporarily, and by that we mean one-day, created the desired effect. In the past when a new tax was introduced, within days the market would shrug it off and resume moving in its previous direction, either up or down.
Some say it’s better to not react to rumors, but we say better to nip them in the bud before they build up any steam.
Categories: Asia Unhedged