China reduces taxes on stock trading for first time in 15 years

China will halve stamp duty on stock trading from Monday for the first time in 15 years, the latest attempt to boost the ailing market as the recovery in the world’s second-largest economy slows.

The Ministry of Finance said in a brief statement on Sunday that it would reduce fees by 0.1 per cent on equity deals “in order to stimulate the capital market and enhance investor confidence.”

Stamp duty is a tax normally imposed by Governments on legal documents and is used as a means of raising funds to finance their activities. With respect to securities, a stamp duty is levied on the total value of all types of purchases or sales of securities.

On Friday, Reuters reported that authorities were planning to cut fees by up to half after the main stock index fell to nine-month lows.

Trading booths have been abuzz with the expectation of reducing the stamp tax since Beijing made a rare pledge last month to “revive equity markets and boost investor confidence.”

The tax cut is likely to lead to an automatic rise in the $9.6 trillion Chinese stock market, which is highly sensitive to political shifts affecting market liquidity, according to Bloomberg.

The reduction will be welcomed by Chinese brokerages and quantitative hedge funds using sequential trading strategies.

The authorities were trying to attract investors whose assets had deteriorated in the country as worrying indicators in the economy grew.

The data collected by Bloomberg showed that foreign investors recorded a net sale in Chinese shares for 13 consecutive sessions as of last Wednesday, the longest period on record.