Chinese stock market, down more than 6% !

The Chinese stock market fell by more than 6% today, presumably due to the increase in stamp duty (by the Chinese government) to 0.3% from 0.1%.

Are investors over reacting to this additional cost? Does this signify a correction in the market (using the increase in stamp duty as an excuse)? Will this spread around to other markets?

There seems to be a lot of talk about excess liquidity which is pushing bond yields’ down, and share & asset prices up. However, no one seems to be able to say exactly what the bonds’ should yield, and exactly at what valuation shares should trade at – not be to be over priced. This will be an interesting week for the financial sector.