China’s exchange traded funds (ETFs) are making a big rally today after the government lowered taxes on stock transactions.
The share-trading stamp tax was cut by the government from 0.1% from 0.3%, reports John Spence for Market Watch. The move is viewed as an effort to give the Chinese stock market a shot in the arm. After the cut was made, some of the Chinese ETFs shot up by as much as 6.8% midday.
China’s exchange traded funds (ETFs) have had a rocky year, but could the economy have turned a corner?
Tony Sagami for Money and Markets reports that the country’s gross domestic product for 2007 rose 11.9%, ahead of the 11.4% projections. It’s the fastest growth in 13 years.
China definitely has some political and social obstacles to overcome: its poor environmental and human rights records, the PR disaster of the Beijing Olympic Games and riots in Tibet. But Sagami says that when it comes to the Chinese economy, things are looking up.
Retail sales rose by 20.2% in the first two months of this year. There has also been a 33.8% increase in auto sales, and demand for luxury vehicles is expected to grow between 40%-45% this year. The trade surplus grew by $41 billion in the first quarter, as well, so China isn’t hurting from any U.S. slowdown yet.
Foreign investment seems to be pouring into China, as well: in the first quarter, it increased 61.3%.
Retail sales are up, foreign investment is flowing, and the Chinese trade surplus seems to be unaffected by a U.S. economic slowdown. China is actually the second largest economy when measured by purchasing power.
Sagami suggests that buying China on the dips can be a profitable move for an investor to make. We would wait until this fund crosses above its trend line (200-day moving average) before diving in.
It’s been a rough few months for these funds. Will the tax rate cut help sustain today’s momentum?
