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CSRC to cut transfer fees again

By Wang Fei’er (Global Times)

08:44, July 23, 2012

The China Securities Regulatory Commission (CSRC), the nation's securities authority, will lower transfer fees charged to stock brokers as part of government efforts to ease transaction costs at the nation's bourses and shore up confidence in the domestic equity market, a spokesperson from the CSRC told local media Friday.

The reduction will likely lower transfer fees by 20 percent, although details on the cut should be released some time prior to September 1, the spokesperson predicted.

This is not the first time in recent months that the government has rolled out trading fee cuts, with the expectation that such reductions will trickle down into savings for institutional and retail investors, according to experts. In fact, the CSRC cut transfer fees on A-share transactions by 25 percent effective June 1. Regulators will also pare down supervisory fees charged to operators of the mainland's two bourses to 0.002 percent of annual transaction value this year, down from 0.004 percent last year, the National Development and Reform Commission and the Ministry of Finance jointly announced on July 13.

The series of moves to cut trading costs shows the government's determination to spur more stock trading activity and maintain the market's health, Zhang Qi, an analyst at Zero2IPO, a Beijing-based consulting firm, told the Global Times.

However, Li Bo, chief analyst from GF Securities, was skeptical about whether the slew of cuts would help investors, given that the earnings of brokers who trade on their behalf are heavily dependent on the difference between the charges the government levies on them and the fees they take from investors. As investors flee the bearish market, the financial situation is becoming even more precarious for brokers, nearly 90 percent of whom haven't scaled back their fees since the government cut transfer costs last month, Li explained.

"The cut to transfer fees charged on traders this time will more than likely fall flat again," Li told the Global Times.

Yet, even if stock investors are able to see a reduction in their transfer costs, this would only bolster market liquidity temporarily, Zuo Xiaolei, chief economist from China Galaxy Securities, told the Global Times.

"Lowering transaction costs has little to do with restoring confidence in the stock market, and will drive up incentives to hold short-term positions, which may breed speculation - not a good development for any stock market," Zuo explained.

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