BEIJING, April 23: China has decided to cut the stamp duty on stock market transactions to 0.1 per cent from 0.3 per cent with effect from Thursday, state media said, following deep plunges in share prices.

The move, announced Xinhua news agency, comes as stocks languish around 46 per cent below an all-time high reached last October, with the key Shanghai Composite Index recently skirting the 3,000-point level.

“This is definitely good news for stocks. Of all the measures that were expected by the market, this one is the strongest they could have picked,” said Yan Li, an analyst with Southwest Securities.

“After the recent drops in share prices, the stock market has already been through sufficient correction, but it needs a trigger to set off a rebound. The stamp tax cut is exactly that trigger,” she said.

The decision to cut the tax was approved by the State Council, or Cabinet, Xinhua news agency reported late Wednesday.

It is the second major step to boost share prices announced by the Chinese authorities this week, signalling concern about the fate of the stock market, where millions of Chinese have invested some of their savings.

On Sunday, China issued new rules placing curbs on the sale of non-tradable shares coming out of lock-up periods. The move addressed concerns about a flood of stock coming into the market quickly and sending prices lower.

China last adjusted the stamp duty tax in May 2007, when it hiked it from 0.1 per cent to 0.3 per cent.

The Chinese stock market at the time was experiencing the fiercest bull-run in its history, but reacted by plunging 6.5 per cent reflecting how important changes to the tax can be for investor psychology.

On Wednesday, the Shanghai Composite Index, which covers A and B shares, closed up 130.54 points or 4.15 per cent at 3,278.33 on turnover of 86.1 billion yuan.—AFP