The inconsistent message from the Ministry of Finance about stock transaction duty tax hike caught the market by surprise and caused an almost 21% correction from its peak of 4335 on 29 May to its lowest of 3406 on 5 June to the Chinese Shanghai Composite index.
ThoughI’ve profited from my H-share and A-share index call warrants which I bought on 7 June, what interested me more is to see what lesson I can learn from the incident.
A recap of the chain of events:
Market rumoured that transaction duty would be raised from 1% to 3%
有关部门负责人”)The State Administration of Taxation 国税总局) 上海证券报)
Anyway, I believe the comment from the unidentified persons were unintentional. Most likely the reporter
For that incident, Premier Wen Jiabao(出其不意) when being asked about
- One was to cool down (not to kill) the local stock market while the other was to avoid foreign speculators to take advantage of the RMB appreciation.
- comments from unidentified sources with a grain of salt.
- Any significant correction caused by rumours in
is good buying opportunity (the Feb correction was also caused by rumours of same nature). Refer to the chart below to see how quickly the two corrections were fully recovered. I maintained my long term bullish view on China. China
- A-50 tracker ETF (2823.HK) is the best instrument I can access having the highest correlation to
index. I was using CAF as a proxy but it proved to be a failure. CAF is still having 20.9% discount to NAV while A-50 Tracker (2823.HK) has almost completely closed the gap with only 2.6% discount as of today’s closing. Why CAF is lagging? Apart from supply/demand dynamics the performance of its underlying against index is other contributor. Shanghai