China stocks drop; Hang Seng slumps 2% on report of stamp duty hike

SHANGHAI: China shares dropped on Wednesday, with investors selling consumer and healthcare stocks, as concerns over policy tightening continued to weigh on sectors with lofty valuations.

Hong Kong shares slumped as well on a media report that the government will increase stamp duty to 0.13% from 0.1% for stock trading. The tax hike was officially announced by Finance Secretary Paul Chan after the morning session.

At the midday break, the Shanghai Composite index was down 1.55% at 3,579.95 points, while the blue-chip CSI300 index dropped 2.05%.

Leading the losses, the consumer staples sector slumped 4.1% while the healthcare sub-index dropped 3.17%.

"Those sectors gained too much in previous sessions, and valuations are still near record highs," said Zhang Qi, analyst with Haitong Securities, referring to the market slump on Wednesday.

Markets could see a sharper rotation from the current position in consumer shares, some fund managers have even stopped new subscription into funds heavily invested in liquor shares, which are in lofty valuations, Zhang added.

The smaller Shenzhen index was down 1.54%, the start-up board ChiNext Composite index was weaker by 2.57% and Shanghai's tech-focused STAR50 index was down 1.1%?.

Chinese H-shares listed in Hong Kong fell 2.27% to 11,639.3, while the Hang Seng Index was down 1.92% at 30,045.95. Shares of Hong Kong Exchanges and Clearing Ltd fell as much as 8% after the report.

"The market had been underselling pressure, especially selling of those tech shares, high valuation shares.

The news regarding the stamp duty just sped up the selling," said Steven Leung, executive director and institutional sales at UOB Kay Hian in Hong Kong.

Around the region, MSCI's Asia ex-Japan stock index was firmer by 0.24% while Japan's Nikkei index was down 0.90%.