Pace of reform must be geared to market conditions
The Chinese stock market is immature and the government will take measures to improve supervision following the latest round of extraordinary volatility, the chairman of the China Securities Regulatory Commission (CSRC) said on Saturday.
The wild volatility reflects the characteristics of Chinese stock markets - an immature market, inexperienced investors, an imperfect trading system and inappropriate supervisory mechanisms, CSRC Chairman Xiao Gang said at a national conference on securities market regulation, according to a press release on the CSRC website Saturday.
Xiao acknowledged regulatory defects and management loopholes, and he vowed to improve regulatory mechanisms, intensify supervision and guard against risks.
Starting in July 2014, the Chinese stock market went through a massive bull phase that saw the Shanghai Composite Index and the Shenzhen Component Index rise about 150 percent as of mid-June 2015.
The markets then plunged by over 30 percent during the short period between June 15 and July 8, 2015, wreaking havoc among investors. Starting from August 2015, the indexes regained about 25 percent but fell back to below 3,000 points in early 2016.
The new CSRC's circuit-breaker mechanism, was suspended after only four trading days.
"Market-oriented reforms, internationalization of the Chinese securities market, progress toward a registration-based IPO system, more standardized market behavior and a delisting system will be the major highlights in the Chinese stock market in 2016," Li Daxiao, chief economist at Shenzhen-based Yingda Securities, told the Global Times Sunday.
The pace of introducing reforms must be one that allows the market to adapt, Li noted.
"The regulators noticed that the scale of refinancing surged in 2015, and some malfeasance during companies' rights offerings caused their shares to fall," said Zhang Yinqi, a senior analyst at Shanghai-based Xiangcai Securities.
Zhang noted that the market's volatility will have a negative effect on the refinancing that will take place during State-owned enterprise reforms. Zhang added that the tightening of regulation on rights offerings will be another highlight in 2016.
A total of 220 companies got listed in China in 2015, raising 157.83 billion yuan ($23.97 billion). The figure was dwarfed by the refinancing of 399 listed companies, which together raised 893.2 billion yuan, according to the CSRC statement.
The clearing of illegal funds should be offset by the addition of new and legal funds, such as pension funds, to ensure liquidity in the secondary market, Zhang told the Global Times on Sunday.
