China Everbright boss steps down following market chaos
Company president pays the price for trading blunder that was the trigger for market chaos in the Shanghai stock market last week
The chief executive and president of China Everbright Securities, which was responsible for the chaotic trading on the Shanghai stock market on Friday, has quit, in an apparent show of Beijing's determination to resolve the crisis.
The board accepted the resignation of Xu Haoming, Everbright said in a filing to the Shanghai Stock Exchange yesterday. The company's chairman, Yuan Changqing, will take charge of daily operations.
Everbright did not elaborate on the reasons for Xu's resignation, but sources close to the China Securities Regulatory Commission (CSRC) said it was a sign that the regulator was taking a tough stance on brokerages, requiring them to strengthen internal controls while playing a stabilising force in a volatile market.
The trading mishap comes at a time when the mainland market is already grappling with a crisis of confidence and the government is looking to it to support the new round of economic reforms.
The securities markets will be a crucial funding channel for the government's ambitious urbanisation programme, which could cost 40 trillion yuan (HK$50 trillion) to deliver over the next decade.
The chaotic trading on Friday, with its steep losses for some investors, threatened to be a liability for the new leadership's potential reform measures.
It was the first market crisis since Xiao Gang took over as chief securities regulator in March. As CSRC chairman, Xiao is charged with bolstering investor confidence to help companies raise much-needed capital as Beijing seeks to wean the economy away from state control and make it more market-driven.
The CSRC has suspended initial public offerings since last October to stem fresh equity supply from diluting existing holdings, but that has failed to breathe life into the market. It has yet to announce when IPOs will resume.
On Friday, problems in Everbright Securities' proprietary trading platform led to billions of yuan of buy orders of some shares at hefty prices, sending 16 major stocks soaring to their 10 per cent daily upper limit and seven billion yuan worth of shares changing hands in a matter of minutes.
Mei Jian , Everbright's board secretary, said the error resulted from a "technical glitch" in the brokerage's own "arbitrage system".
As a result, the Shanghai Composite Index jumped 5.6 per cent before retreating in the afternoon and finally ending the day 0.6 per cent lower, leaving investors who had joined the morning rally in the red.
The CSRC immediately launched an investigation into the Shanghai-listed brokerage. Sources at the time had predicted some senior executives would be "punished".
Everbright suffered losses of at least 200 million yuan following the trading error when the market dropped later in the day after the spike in the morning session.
"The punishment for just one brokerage might not be enough to convince investors," said Dazhong Insurance fund manager Wu Kan .