A reduction in the tax paid on share purchases in China sent shares surging in the late morning and afternoon trading sessions in China and Hong Kong on Wednesday, while Japanese investors continued to exercise on over buying.
China's Shanghai Composite Index rose 131 points, or 4.2%, to 3278.33, after Beijing announced that it would cut stamp duty to 0.1% on the purchase of every share, vs. 0.3% previously.
The new tax rate will take effect Sunday. In Hong Kong, the Hang Seng closed at a three-month high, up 350 points, or 1.4%, at 25,289.24. Japan's Nikkei gained 31 points, or 0.2%, to 13,579.16.
Market volume in Hong Kong was the highest for an up day so far in 2008, at HK$105.3 billion ($13.5 billion).
China Watch: Luxury Cars Fly Off Lots
var config = new Array(); config<BRACKET>"videoId"</BRACKET> = 1513327721; config<BRACKET>"playerTag"</BRACKET> = "TSCM Embedded Video Player"; config<BRACKET>"autoStart"</BRACKET> = false; config<BRACKET>"preloadBackColor"</BRACKET> = "#FFFFFF"; config<BRACKET>"useOverlayMenu"</BRACKET> = "false"; config<BRACKET>"width"</BRACKET> = 265; config<BRACKET>"height"</BRACKET> = 255; config<BRACKET>"playerId"</BRACKET> = 1243645856; createExperience(config, 8);
"I'm not sure the reduction in stamp duty will spur the market into life," says Martin Marnick, a director at Helmsman Global Trading in Hong Kong. "If you see a run on ADRs, I would look at shorting them and cover the positions in Hong Kong."
In particular, Marnick recommends placing short bets on
China Petroleum & Chemical
China Life Insurance
In Hong Kong, shares in China Mobile rose 2.3%, to HK$134.90, and China Petroleum gained 3.8%, to HK$8.15. PetroChina continued to surge on speculation that the company will get a windfall subsidy from Beijing, rising 4.8%, to HK$11.30.
Insurers constituted the best-performing sector, as China's insurance regulator announced that it has received multiple applications from banks to invest in the sector. Chinese banks have roughly $400 billion of liquidity to invest.
"The lines between banking and insurance will continue to blur, and banks are very keen to make such investments,"
quoted the regulator's spokesman Yuan Li at a news briefing in Beijing.
China Life Insurance climbed 2.8%, to HK$31.30, and
, China's second largest insurer, soared 5%, to HK$66.05. ADRs were surging during the afternoon in New York.
A technical inflation-related trade continued to have an impact on shares in gold miner
Yanzhou Coal Mining
, despite heavy reloading by a foreign buyer in Yanzhou. The trade involves selling Yanzhou and buying Zijin until the percentage performance of the two companies converges, a practice known as reversion to the mean. The trade is expected to run until around April 24, according to dealers.
The share prices of coal and gold companies usually thrive in periods of inflation. Yanzhou Coal rose 3.5%, to HK$13.56, while Zijin Mining soared 5.3%, to HK$7.57.
In Japan, stocks continued to tread water, despite a dramatically weakened yen from last week's levels. The yen is stabilizing around 103.40 vs. the dollar, a significant improvement for exporters such as Sony on previous levels of around 101 yen to 102 yen.
Among the best performers, agricultural supplier
rose 3.5%, to 744 yen, while financier and leaser
jumped 1.8%, to 17,330 yen.
lost 0.2%, to 4,500 yen, and
slid 1.9%, to 5,140 yen.
In New York, shares and ADRs of Japanese companies were mostly gaining, and the yen remained weak vs. the dollar going into the afternoon. If those conditions hold by market close, that may lead to initial buying on the Nikkei in the Japanese morning.
Other Asian markets were mixed. Taiwan's Taiex lost 0.3%, to 9008.49, and South Korea's Kospi added 0.7%, to 1800.79. India's Bombay Sensitive Index slipped 0.5%, to 16,698.03.
Daniel M. Harrison is a business journalist specialising in European and emerging markets, in particular Asia. He has an MBA from BI, Norway and a blog at
. He lives in New York.