No Taxation Without Representation! – Chinese Investors Rebel Against Increase in the Stamp Tax

Ever since the huge selloff in China on Tuesday February 27 which sent stock markets around the world crashing down, investors everywhere have been watching the Chinese stock market. 

There was a second selloff on Thursday April 19 (subscription required) as investors in China feared that the government might raise interest rates to cool an overheating economy on the eve of a 1st quarter GDP report that came in at 11.1%. 

And there was a third selloff today (Wednesday May 30)(subscription required) as China’s Ministry of Finance tripled the stamp tax, which is a transaction charge on stock trades, from .1% to .3%.

Here’s how the initial and the last two Chinese selloffs effected the Dow:

                                Feb 27              April 19           May 30

Shanghai Index    -269 (-8.85%)   -163 (-4.51%)   -282 (-6.50%)

Dow Jones            -416 (-3.29%)    +5 (+.04%)      +66 (+.49%) (3:00pm EST)

In the wake of the second China sell-off on April 20 I wrote a post entitled “China Selloff III: Coming to a Stock Exchange Near You Soon” (Apr 24). 

However, it appears, at least for now, that the market is prepared for selloffs in China and the last two have just been blips for US markets which have opened a bit lower each time but then rallied to finish in positive territory (unless we have a big turnaround in the last hour today). 

We’ll have to see if that holds true if (when?) there is a bigger selloff over there.