The Shanghai Composite Index (SCI) rebounded on Wednesday after two consecutive days of losses as investors went bargain hunting, the South China Morning Post reported. The index lost 25.084 points in the morning session but ended up closing at 4,078.60, a gain of 105.23 points or 2.7%. The morning slide was blamed on a news that a draft plan to reduce or remove the 20% tax on interest earned from bank accounts had been brought before the National People's Congress. The tax cut could encourage investors to remove money from the stock market and put it back into savings accounts. With the inflation rate rising to 3.4% in May against the benchmark one-year lending rate of 3.06%, this is not currently a popular course of action. However, some market watchers predict further corrections, arguing that A-shares are just too expensive. The top 100 stocks are trading at 38 times last year's earnings, 28 times projections for this year and 23 times projections for next year.
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