Time ripe to invest in banking sector

(Xinhua)
Updated: 2007-06-04 17:11

Listed banks are likely to be popular on the domestic stock market after the Ministry of Finance tripled stamp duty on share transactions to dampen rampant speculation, analysts said.

Last Tuesday night, the Ministry of Finance tripled the stamp duty on share transactions from 0.1 percent to 0.3 percent in a surprise move. The tax increase immediately hit on the market as the barometer Shanghai Composite Index tumbled 6.50 percent to 4,053.09 on Wednesday.

However, all Shanghai-listed banks, led by mid-sized China Merchants Bank and China Minsheng Banking Corp, rose against the benchmark index on Thursday, and triggered expectation of more interest in big caps as the stamp duty increase drove out speculators.

Merchants Bank gained 8.22 percent on Thursday and kept a rise of 1.61 percent on Friday, rising above its slump of 6.21 percent on Wednesday.

"The stamp duty is targeted at those who trade stock frequently just for speculation, such as retail investors who buy shares in one company today and sell the shares tomorrow," said Qiu Zhicheng, a Haitong Securities Co analyst. "People tend to hold on to stock in listed banks, which are not subject to wild fluctuation."

Banks rarely show price spikes in their shares, so the attraction of making quick money is limited, although there is less risk of losing money.

That's why some retail investors would rather shun bank shares and pick up other sectors.

Lao Guo, a 53-year-old retiree, sold her holdings in Merchants Bank a month ago because the lender moved "too slowly when compared with other shares," she said.

"I know Merchants Bank is a good investment choice but not my first choice," she said before the stamp duty increase. "However, why should I overlook other opportunities to make money quickly and await slow gains?"

(For more biz stories, please visit Industry Updates)