| Domestic stocks decline on fears of new measures |
SHANGHAI, June 1 -- Domestic shares fell, erasing earlier gains, on concern there will be new efforts to cool the market, including a capital gains tax, after a tripling of the duty on securities trades failed to deter new investors.
The Shanghai Composite Index, which tracks the bigger of mainland's stock exchanges, lost 2.7 percent to 4,000.74. The Shenzhen Composite Index, which covers the smaller one, slid 5 percent to 1,128.57.
"Rumors of a capital gain tax and interest rate increases are driving down the market," said Charlie Chen, who invests US$1 billion in Chinese stocks for Fortis NV, Bloomberg reported.
The central bank this month raised interest rates for the second time this year, encouraging people to save rather than invest in stocks.
Bright Dairy, the nation's biggest yogurt maker, tumbled 1.43 yuan(18 US cents) to 12.83 yuan. Huadian Power International Corp, the country's third-largest publicly traded power producer, slid 1.11 yuan to 9.98 yuan. Dongfeng, which makes light trucks in China with Nissan Motor Co, plunged 0.87 yuan to 7.80 yuan.
"Investors, particularly individual ones, are worried about what else the government will do to curb the market," said Fan Dizhao, who helps manage about US$1.8 billion at Guotai Asset Management Co. in Shanghai. "This is a time of uncertainty."
The government might introduce further measures, such as launching index futures, banning day trades and speeding up the sale of state-owned shares if the market doesn't cool down, Citigroup Inc strategist Lan Xue said in a research note.
Elsewhere, Panzhihua New Steel & Vanadium Co, the world's third-biggest producer of vanadium steel used in high-speed railroads, plunged 1.36 yuan, or 10 percent, to 12.23 yuan.
The parent company intends to ``go public through the vanadium unit,'' Panzhihua Steel said in a statement to the Shenzhen Stock Exchange today.
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