China stocks drop as stamp duty triples

May 30 | Updated: May 31 2007, 05:30am hrs
Chinas stocks tumbled the most in three months after the government tripled the tax on securities transactions to cool a rally thats drawing more than 3three lakh new investors a day.

The CSI 300 Index dropped 281.83, or 6.8%, to close at 3886.46 in Shanghai, the biggest fluctuation among markets included in global benchmarks. The value of local stocks has more than doubled this year to $2.47 trillion and brokerage accounts topped 100 million for the first time this week.

The Chinese government is concerned that there are too many people in the market, and they are gambling, Mark Mobius, who oversees some $30 billion as managing director of Templeton Asset Management Ltd, said in an interview in Hong Kong.

More than half of the shares included in the CSI 300 fell by the 10% daily limit on Wednesday, including Citic Securities Co, the nations largest publicly traded brokerage, and China Shipping Development Co, the biggest oil tanker operator.

The value of shares traded in China on Wednesday was a record 407.1 billion yuan ($53 billion), according to data compiled by Bloomberg.

Crash!

The CSI 300 Index dropped 281.83, or 6.8%, to close at
3886.46 in Shanghai
More than half of the shares included in the CSI 300 fell by the 10% daily limit
The value of shares traded in China on Wednesday was a record $53 billion

Stamp duty on share trades was increased to 0.3% to promote the healthy development of the securities market, the finance ministry said on its website. The central bank this month raised interest rates for the second time this year, encouraging people to save rather than invest in stocks, and brokerages were ordered to make investors sign a declaration acknowledging risks when opening accounts.

The government has been trying to curb speculation for months. A crackdown on investments with borrowed money on February 27 led to a 9.2% drop in the CSI 300

Bloomberg