The new head of China’s securities regulator has been tasked with restoring confidence after policy missteps by his predecessor rattled investors and helped deepen a US$5 trillion stock market rout.
China Securities Regulatory Commission (CSRC) Chairman Liu Shiyu (劉士餘) is assuming the oversight of the world’s second-largest stock market in the wake of last summer’s slump, which saw former CRSC chairman Xiao Gang (肖鋼) criticized for mismanagement.
In addition to needing to rebuild morale among China’s about 99 million investors, Liu is set to preside over an overhaul of initial public offerings, the planned expansion of a trading link with Hong Kong and a campaign to get the nation’s shares included in MSCI Inc’s global indexes.
Photo: AFP
Under Xiao — who was in the post less than three years — looser controls over leverage helped triple the value of Chinese equities to US$10 trillion before share prices collapsed last summer.
Liu was previously the chairman of Agricultural Bank of China Ltd (AgBank, 中國農業銀行), the third-largest lender in China.
One of Liu’s most important tasks will be to oversee the introduction of a more market-based registration system for initial public offerings, expected to be unveiled later this year.
The new regime would leave the questions of initial public offerings supply and timing to companies and the market, rather than the CSRC, and give firms more power to determine pricing.
Investors are still awaiting an exchange link between Hong Kong and Shenzhen, modeled on the Shanghai one that began in November 2014.
MSCI has said that giving foreigners more access to China’s second-largest equity market — home to many of its small technology companies — is key to getting the nation’s stocks included in global gauges.
The index compiler refrained from taking that step in June last year, saying China still needed to make shares easier for foreign investors to access.
The decision came before the summer rout spurred state intervention that was criticized by global asset managers.
Xiao last month acknowledged mistakes after a review of the turmoil.
An immature bourse and participants, incomplete trading rules, an inadequate market system and an inappropriate regulatory system were to blame and regulators will learn from the experience, he said.
In one of the most high-profile missteps, the CSRC scrapped circuit breakers in the same week it introduced them.
The implementation of the circuit breaker system last month, which was meant to reduce volatility, had the opposite effect as investors panicked at the prospect of not being able to sell their shares.
For now, shareholders will be looking to Liu to balance the interests of the state with the opening up of the US$5.6 trillion market, while attempting to restore morale among the individual investors who account for more than 80 percent of trading.
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