Job No 1 for new CSRC chief: China ‘needs clear rules’ to unleash full force of share market

Investors pin hopes on new CSRC chief Liu Shiyu to come up with stronger regulatory framework

The new chief at the mainland’s securities watchdog needs to come up with a stronger regulatory framework if market forces are to play a bigger role in the stock market, observers said yesterday.

Investors and analysts said they expected the A-share market to open higher today following ­Xiao Gang’s departure a schief of the China Securities Regulatory Commission, but they remained pessimistic about the long term.

“A small rise can be anticipated because investors have been expressing their dissatisfaction with Xiao Gang for a few months,” Shanghai Shiva Investment fund manager Zhou Ling said. “But it will be a rebound instead of a turnaround unless the fundamentals improve.”

After months of market vola­tility and turmoil, Beijing ­announced on Saturday that Agricultural Bank of China chairman Liu Shiyu would replace Xiao.

Changanjwj, a WeChat ­account linked to the Communist Party’s Political and Legal Affairs Commission, described the CSRC’s top job as a hot seat. It said one of Liu’s urgent tasks was to strengthen the market’s regulatory framework, and ensure that risks for different investors were properly assessed.

Haitong Securities analyst Zhang Qi said the mainland stock market was still a “far cry” from one driven by market forces.

“Retail investors believe in the regulator and make their investment decisions based on the regulator’s directions,” Zhang said.

“It would be advisable to make rules to clarify what the regulator is supposed to do or not do.”

Shanghai-based hedge fund manager Dong Jun said the market was in a mess, but “it doesn’t seem as if a veteran banker can iron out the thorny issues”.

“To let market forces play a big role in the market, you need a professional with investment banking or brokerage experience to avoid a repeat of Xiao’s mistakes,” Dong said.

Liu, 54, was a deputy governor of the central bank from 2006 to 2014 before becoming AgBank chairman. He gained credit for helping overhaul major state-owned banks and drafting rules for internet finance.

A stock market rout between mid-June and late August last year wiped out an estimated US$5 trillion in market value. Two trading suspensions resulting from the newly introduced circuit-breaker system in the first week of this year exacerbated bearish sentiment, deterring the CSRC from further liberalisation.

Xiao was blamed for the failures of the circuit breaker and for not curbing rampant irregular trading fuelled by an influx of speculative capital via the grey financing market.

Text: SCMP by Daniel Ren 22-02-2016

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