Thursday, September 18, 2008

News Line: Asia's financial markets in focus

1) China cancels stamp tax on stock purchases to support equity markets reports Xinhua

BEIJING, Sept. 18 (Xinhua) -- China decided on Thursday to scrap the stamp tax on stock purchase, effective on Friday, in a move to boost the equities market after domestic stocks fell for third consecutive day since Tuesday.

With the authorization of the State Council, China's Cabinet, the Ministry of Finance and the State Administration of Taxation said they decided to cancel the share trading stamp tax on stock purchase while the stamp tax on share selling remained unchanged at 0.1 percent.

The cancellation came hours after Chinese stocks tumbled 1.72 percent on Thursday, amid the current global financial turmoil.

It was the first time since 1991 authorities had levied an unilateral stamp tax on stocks trading and the second time this year they had adjusted the stock trading stamp tax.

On April 24, it cut the tax from 0.3 percent to 0.1 percent amid falling share prices.

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2) Futures prove a perfect fit for a booming economy (China) reports Xinhua

BEIJING, Sept. 18 -- With a widening product variety and deepening liquidity pools, the mainland's futures market is playing an increasingly important role in serving the national economy.

Zhengzhou Commodity Exchange (ZCE), the first experimental futures market approved by the State Council, was established on Oct 12, 1990. The ZCE, which started with forward contract trading, launched its first futures contracts on five agricultural products - wheat, corn, soybean, green bean and sesame on May 28, 1993.

It still specializes in agricultural and chemical product futures, including hard white wheat, strong gluten wheat, sugar, cotton, rapeseed oil and PTA, a petroleum-based chemical product.

Three years after the establishment of ZCE, Dalian Commodity Exchange announced it would trade in futures contracts underlined by a variety of agricultural produce, mainly grown in Northeast China. So far, futures contracts on soybean, soybean oil, corn, palm oil, soymeal and LLDPE, a petroleum-based product, are traded on the Dalian bourse.

In 1999, Shanghai Futures Exchange was established and China's futures trading was expanded to metal and energy products. Now it deals in six futures products - copper, aluminum, zinc, gold, fuel oil and natural rubber.

Shanghai Futures Tower (Photo: China Daily)

The demand for commodity futures as hedging tools has been on the rise as the Chinese economy continues to advance at a brisk pace. The country is now one of the largest producers and consumers of a wide range of commodities, including oil, steel, copper, corn, wheat and soybean. To diversify their product ranges, the nation's three commodity futures exchanges are doing research to introduce new contracts.

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3) China to adopt news methods to value suspended stocks amid market slump reports Xinhua

BEIJING, Sept. 15 (Xinhua) -- China's fund management companies will adopt new methods such as incorporating industry index to value suspended stocks from Tuesday, China's securities regulators said on Monday.

The move was aimed to prevent abnormal high prices of suspended stocks which resumed trading amid a market slump.

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4) Three Chinese commercial banks hold Lehman-related bonds reports Xinhua

BEIJING, Sept. 18 -- At least three large Chinese commercial banks have disclosed their exposure to the worsening U.S. financial crisis through bonds issued by investment bank Lehman Brothers, which has filed for Chapter 11 protection.

China Merchants Bank Wednesday said in a statement to the Shanghai Stock Exchange that it holds 70 million U.S. dollars of Lehman Brothers bonds, of which 60 million dollars is senior debt and the rest subordinated debt.

The bank also said it has not made special provisions for the book losses on those bonds and will evaluate their potential risks and disclose further details at a later date.

Industrial and Commercial Bank of China (ICBC), the country's largest State-controlled commercial bank by assets, holds 152 million dollars in bonds issued by, or linked to, Lehman Brothers.

At press time, ICBC had not issued a statement to the Shanghai bourse to specify its exposure to Lehman Brothers.

Bank of China (BOC) was also affected by the failure of Lehman Brothers. BOC holds 75.62 million dollars in bonds issued by the ailing U.S. investment bank. It also loaned 53.2 million dollar to Lehman Brothers and its subsidiaries. BOC was reportedly listed as an unsecured creditor in documents filed by Lehman Brothers at the United States Bankruptcy Court of the Southern District of New York.

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5) State investment arm to short up three Chinese lenders' shares with stock-buying plan reports Xinhua

BEIJING, Sept. 18 (Xinhua) -- The Central Huijin Investment Co.,Ltd., an investment arm of the Chinese government, said Thursday it would buy the shares of three major Chinese lenders on the secondary market to shore up their share prices amid stock market slumps.

The company said it would buy the shares of the Industrial and Commercial Bank of China, the Bank of China and the China Construction Bank and operations had started on Thursday.

Central Huijin was set up in 2002 with a mission to reform state-owned banks burdened with a high ratio of non-performing loans.

Courtesy of Xinhua