China's benchmark stock index tumbled 6.5 per cent today after the government hiked the stock trading tax in its strongest effort yet to cool rampant speculation.
The Shanghai Composite Index swung wildly before ending the day at 4,053.088 points, its lowest level since May 21st. At one stage, it fell as much as 7.4 per cent.
The index had climbed 62 per cent so far this year to yesterday's record closing high, in a bull run fuelled by the entry of millions of individual investors into the market.
The Ministry of Finance announced after midnight yesterday that it was raising the stamp tax to 0.3 per cent from 0.1 per cent, the latest in a series of official steps - including an interest rate hike this month - to cool the market.
Analysts said that, by targeting the speculators who have accounted for much of the trading turnover in recent weeks, the tax hike could hurt the market in the short term. But they did not expect it to cause a crash or reverse a long-term uptrend.
"The bull market is not over yet," Royal Bank of Scotland said in a report, predicting that Chinese authorities would step in if necessary to prevent a collapse of the market, which is key to their economic reform plans.