Chinese share markets leap on support hopes, tax cuts

Share markets in China surged on Monday morning in the wake of coordinated statements of support for plunging equity markets by senior regulators, and as China prepares to overhaul its income tax law for individuals.

At the midday break, the benchmark Shanghai Composite index was 4.2 per cent higher, on track for its strongest day since March 2016.

The blue-chip CSI300 index jumped 4.4 per cent, which would be its strongest day since November 2015. Of the 1,486 constituents of the Shanghai Composite, 1,465 posted gains.

On Friday, Chinese Vice Premier Liu He, who oversees the economy and financial sector, joined the heads of the China Securities Regulatory Commission, the China Banking and Insurance Regulatory Commission, and the People's Bank of China in coordinated statements to rally investor confidence amid a bruising market slump.

Yang Hai, an analyst at Kaiyuan Securities in Xi'an, said the statements of support "laid the foundations for a rebound" after a slump caused by factors including the Sino-U.S. trade war, domestic economic adjustments and especially concerns over the rising risk of forced margin calls.

"We see a high likelihood that the A-share market will enter a period of rebound," Yang said in a note. He added that planned tax cuts and the release of individual income tax deductions would particularly support banks, insurance and consumer firms.

China's government on Saturday published a draft version of new rules for tax deductions available to individuals as it overhauls its individual income tax law, a move to cut taxes to try to spur growth.

Investors snapped up shares across sectors, with securities firms seen as particularly likely to benefit from official moves to support stock markets. A sub-index of the CSI300 tracking securities firms leapt the daily limit of 10 per cent.

The CSI financial sector sub-index gained 4.64 per cent, the consumer staples sector added 4.2 per cent, the real estate index jumped 5.01 per cent and the healthcare sub-index was 4.19 per cent higher at midday.

The smaller Shenzhen index was up 4.96 per cent and the start-up board ChiNext Composite index advanced 5.69 per cent.

Despite the gains, the Shanghai Composite index remained down 19.7 per cent for the year, while the CSI300 was off 18.8 per cent.

Monday's gains extended to Hong Kong, where the Hang Seng China Enterprises index was 3.3 per cent higher at midday. The Hang Seng index added 2.4 per cent.

The sub-index of the Hang Seng index tracking energy shares rose 2.78 per cent while the IT sector 3.65 per cent.

China's currency remained stable as share markets surged. At around 0438 GMT, the yuan was quoted at 6.9318 per U.S. dollar, 0.04 per cent weaker than the previous close of 6.929.

(With inputs from agencies.)