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China stock market

Shanghai Stock Exchange to be headed by veteran securities regulator Wu Qing

Appointment of Wu, 51, reflects a departure from the normal practise of promoting older candidates to the post

PUBLISHED : Thursday, 26 May, 2016, 6:08pm
UPDATED : Thursday, 26 May, 2016, 9:27pm

The Shanghai Stock Exchange has got a new boss – Wu Qing, a regulator known for his zero-tolerance toward market irregularities.

The appointment of Wu, 51, who replaces Gui Minjie as the chairman of the Shanghai bourse, comes at a time when memories of last summer’s stock market crash are still fresh in the minds of many investors. He also joins in the aftermath of a series of botched efforts at reforms and liberalisations.

As a veteran securities regulator, Wu took the helm of Hongkou district in Shanghai for six years, a personnel arrangement by the Communist Party’s organisation department to help him garner regional experience.

He will carry a rank of vice minister after becoming the Shanghai exchange’s chairman.

It is the first time that a young and promising political star is designated to lead the Shanghai exchange, the bigger of the mainland’s two stock exchanges.

Normally, a vice chairman of the China Securities Regulatory Commission (CSRC) who were nearing the retirement age of 60 would be appointed the chairman of the stock exchange, which is seen as an honorary role.

On the mainland, the stock and futures exchanges are under the direct oversight of the CSRC..

Among its powers, the CSRC has final oversight of initial public offerings, the ability to direct exchanges in making trading rules, and authority to impose administrative arrangements for the bourses.

It remains to be seen whether Wu will be granted more power in conducting reforms at the exchanges, but it is widely believed that he’ll play an important role in monitoring share trading.

Liu Shiyu, chairman of the CSRC, told officials with the Shanghai Stock Exchange on May 20 that the appointment of Wu reflected the regulator’s commitment to a transparent stock market.

The mainland share market is now mired in a crisis of confidence following a market rout that wiped out US$5 trillion of market wealth between mid-June and late August in 2015.

Meanwhile, two trading suspensions in the first week of this year, as a result from the circuit-breaker system, provoked ire among retail investors who criticised the CSRC for failing to safeguard the interests of small investors.

Beijing has waged a high-profile war against short-sellers since June last year. In a related development, a number of officials and powerful money managers have been investigated on corruption charges. These include former CSRC vice chairman Yao Gang and Xu Xiang, dubbed as the mainland’s most successful hedge fund manager.

“With a young and experienced technocrat taking charge of the stock exchange, it will prove to be a constant menace to those unscrupulous traders,” said Wang Feng, chairman of Shanghai-based Ye Lang Capital. “The stock exchange is the forefront of market regulation.”

In 2009, Wu, when he was chief of the securities regulator’s department of fund supervision, directed a nationwide clean-up effort by the CSRC to investigate suspicious trades by mutual funds.

At that time, 14 industry officials including two general managers of fund houses were uncovered and punished.

Analysts expected Wu to take a harsh stance on “rat” trading, fund managers using affiliated accounts owned by their relatives or friends to trade shares on their behalf. They also belive Wu will tackle perceived price manipulation, which Wu reportedly believes is a factor leading to market volatility.

“It is the right time for the exchange to take more responsibility for policing the market,” said Shen Ye, a Shanghai-based hedge fund manager. “The exchange has a good command of big data technologies and it is now easy for them to spot bad boys.”

In 2000, Caijing magazine, citing an internal report by the Shanghai bourse, exposed unethical price-rigging practises by funds, giving investors a rude wake-up call and sparking a bear market as investors lost confidence.

The exchanges are also likely to have more power in reviewing IPOs under a pending registration-based approval system.

Under the new system, the exchanges will be responsible for reviewing listing applications to ensure the information are accurate before approvals are given to raise funds.

This story has been amended to remove an erroneous reference to Wu Qing’s employment history. An earlier version incorrectly identified him as a former official with the CSRC and as chairman of the Shenzhen Stock Exchange.