Market Outlook: 04-30-08

Robert Hsu, April 30, 2008

After a record tumble the week before, Chinese stocks surged 9.3% last Thursday, its biggest gain in more than six years. The big rally can be attributed to the Chinese government's announcement that it was cutting the stamp tax from 0.3% per trade to 0.1% per trade.

The stamp tax is important because Chinese investors are charged the tax on every trade they make. China's doesn't inflict capital gains taxes on trading profits like the U.S., so the revenues from the stamp tax go to the government.

Last May, the Chinese government increased the stamp tax from 0.1% per trade to 0.3% per trade in an attempt to cool off the booming Chinese stock market. Now, the Shanghai market has dropped nearly 50% from its record high last October due to worries that earnings growth will slow and share sales will overwhelm demand.

So just as I expected, the government finally became very concerned about the potential meltdown and stepped in to support the market. This is a very bullish sign for Chinese investments overall, and our trades, in general. With a strong performance in stocks traded on the Shanghai exchange, the psychology in our stocks will also improve. And the valuations of Chinese stocks are looking quite attractive and are timely buys again.

For Robert's top recommendations to profit from the boom in Chinese stocks, become a member of Asia Edge.

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