An investor is watching market information in Shanghai on Thursday. The benchmark Shanghai Composite Index closed at 1,895.84 points, down 33.21 points, or 1.72 percent. The Shenzhen Component Index closed at 6,563.07 points, down 116.99 points, or 1.75 percent.

SHANGHAI, Sept. 18 (Agencies) -- China's Finance Ministry has eliminated a tax on share purchases, effective Friday, in a move to boost the equities market after domestic stocks fell for third consecutive day since Tuesday.

China Central Television said late Thursday that a 0.1 percent stamp tax on buying shares would be abolished, although an equivalent tax on share sales would remain.

Meanwhile, a government investment arm plans to buy shares in three major Chinese banks in order to boost their share prices, which have plunged following last weekend's announcement that investment bank Lehman Brothers has filed for bankruptcy, the Xinhua News Agency reported.

It said Central Huijin Investment Corp., which holds majority shares in many state-run companies and financial institutions, began buying shares in the Industrial & Commercial Bank of China, Bank of China and the China Construction Bank on Thursday.

The moves follow a volatile day that saw the country's benchmark Shanghai Composite Index plunge 7 percent before recovering some losses to close 1.7 percent lower, at 1,895.84.

Already weakening bank shares fell further early Thursday after lenders disclosed holdings in Lehman Brothers bonds totaling about US$300 million. But they rebounded later in the day on bargain hunting.

Bank of China gained 2.7 percent to 3.05 yuan and ICBC rose 0.6 percent to 3.44 yuan, while China Construction Bank fell 0.5 percent to 3.81 yuan.

"I think the market is not stable at all," An Yun, a strategist at Shenyin Wanguo Securities in Shanghai, said of the rollercoaster-like session.

Analysts said rumors of possible government moves to support the market also helped to spur buying late in the session.

Regulators have used adjustments in the stamp tax in the past to help spur or cool demand for shares.

On April 24, the last time the stamp tax was cut, the Shanghai Composite Index soared 9.3 percent -- its biggest one-day percentage gain ever.

The previous tax cut, to 0.1 percent from 0.3 percent, reversed a tax increase imposed in May, 2007, when regulators were trying to restrain surging share prices.