NewChina’s securities watchdog says market bubbles have been unwound, equities stabilising

Risks and bubbles in China’s volatile stock markets have been unwound considerably and trading is generally normal with sufficient liquidity and rising stability, the official Xinhua news agency said, quoting an unnamed official with securities watchdog China Securities Regulatory Commission.

Separately, People’s Bank of China governor Zhou Xiaochuan, said at the G20 meeting in Turkey that China’s stock market “correction” is largely over after a bubble powered a rally to a 7-year peak in the first half of the year.

“The deleveraging is going on and the real economy is not significantly affected by the market correction. At present, the yuan’s rate against the dollar is stabilising, the stock market correction has almost come to an end, and the financial market volatility is on course for fading out,” Zhou said.

As the valuation level of A shares went down, the process of deleveraging was completed and volatile speculation has been curbed, the CSRC official said. CSRC is doing research and plans to introduce an unspecified “circuit breaker”, the official added, saying this would restrict programme trading, reduce speculation, and regulate margin trading.

“The stock market follows its own principals to go up and down. The government would not interfere under normal circumstances. However, once the market volatilities expanded to abnormal levels, the government would never leave it alone. On the contrary, it would take measures to stabilise the market decisively,” the official said.

The CSRC has sent out notices to fine financial institutions up to 1.18 billion yuan (HK$1.44 billion) for illegal actions, the CSRC official said. Another 200 million yuan has already collected, according to the official.