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Daniel Ren

Enoch Yiu

Phoenix Kwong

The mainland stock market stabilised on Friday after Beijing scrapped the circuit breaker system and injected fresh capital through state-backed institutions to prop up share prices.
As the authorities make an all-out effort to restore investor confidence in a beleaguered market, embattled chief securities regulator Xiao Gang is facing unprecedented pressure, with a series of missteps making the reform of the mainland capital market the butt of many jokes.
The Shanghai Composite Index rose 2 per cent yesterday to 3,186.41, after a 10 per cent decline in the first trading week of the year that wiped out all of the 9.4 per cent gain of 2015.
It was the worst weekly performance since August.

Brokers said Beijing instructed the “National Team” – the China Securities Finance Corporation and other state-owned brokerages and fund houses – to buy heavyweight financial stocks to underpin the key indicators.
The rescue efforts resulted in a V-shape rebound in intraday trading, with the benchmarks on the Shanghai and Shenzhen stock exchanges recovering from a drop of 2 per cent to hit intraday highs in the morning that were 3 per cent above the previous day’s closes.
The trading suspensions in tandem with sharp falls on the mainland stock exchanges rippled through equity, commodity and currency markets around the globe.
READ MORE: China regulators suspend circuit breaker mechanism, citing need for ‘stability of markets’
Shares, crude oil prices and currencies in Asia, the United States and Europe fell during the first week of this year amid investors’ concerns about Beijing’s ability to keep the equities and Chinese currency under control.
Speculation has mounted that Xiao will step down as chairman of the China Securities Regulatory Commission after the short-lived circuit breaker system forced two trading suspensions within four days of it coming on stream.
At a closely watched press conference yesterday, CSRC spokesman Deng Ge did not mention the future of the circuit breaker or Xiao, saying only that the chairman would head a commission task force to help reduce poverty in the country’s underdeveloped regions by developing financial services in the areas and training industry officials.
Xiao Gang will [eventually] have to be held accountable for the chaotic scenes on the market last year
Shanghai Shiva Investment fund manager Zhou Ling
But Shanghai Shiva Investment fund manager Zhou Ling said: “Xiao will [eventually] have to be held accountable for the chaotic scenes on the market last year.”
With or without a new head, there will still be a lingering question about whether the commission has the clout to renew confidence and put the volatile market back on track.
“It’s not certain that his replacement would do a better job because it’s difficult to shore up investor confidence after so many bitter experiences,” Shanghai Shiva’s Zhou said.
A market rout in mid-June last year, investigations into two top CSRC regulators for “serious violation of Communist Party discipline”, an unsuccessful government campaign to bail out the troubled market, and delays to reforms of the new share offering mechanism had already ratcheted up pressure on the top securities regulator.
Xiao, 58, took the helm of the commission in March 2013 as the mainland’s new leadership embarked on a plan to overhaul the economy.
The capital market was seen as key to these efforts to shift economic dependence from manufacturing to services.
READ MORE: Stock market regulators in China must fine-tune circuit breaker to avoid repeat of ‘Black Monday’
Premier Li Keqiang pinned hope on the stock market to help companies raise funds as he de-leveraged an economy to curb non-performing bank loans.
To that end, the CSRC’s priorities after Xiao took over were to buoy the stock market and relax initial public offering approval procedures.
Between September 2014 and mid-June last year, the key indicator for A shares soared 130 per cent, boosted by a capital influx brought on by loosened regulations for margin financing, a system that lets investors borrow money from brokerages to buy shares.
At least 2 trillion yuan (HK$2.5 trillion) in cash that investors secured from grey market financing was added to the frothy mix. The market then began plunging in mid-June, wiping out as much as US$5 trillion of market value and causing those leveraged investors to dump shares desperately to meet the margin requirement.
Beijing injected at least 1.5 trillion yuan in stabilising funds to stop the death spiral but the fall continued until late August.
In September last year, Xiao introduced the circuit breaker system as a way to maintain market stability whenever panic selling occurred.
Trading was suspended twice – on Monday and Thursday – after the blue-chip CSI300 plunged to the 7 per cent limit during what was the new system’s first week of operation.
On Thursday, the CSRC announced it was suspending the circuit breaker system, saying it had failed to achieve its goal of preventing turbulence.
In Hong Kong, the Hang Seng Index closed at 20,435.91 yesterday, up 0.59 per cent but lost 6.52 per cent, or 1,429 points for the week, which was the biggest weekly fall since September 2011.


Chinese stocks steady after another fresh state injection to prop up prices

Investors check stock prices at a securities brokerage house in Beijing, China, Friday, Jan. 08, 2016. China's stock markets Friday resumed without the 'circuit breaker' mechanism, which the securities regulator suspended after it halted trade for the day twice this week due to large falls that have sent shockwaves through world markets. 08JAN16 SCMP/Simon Song

Investors check stock prices at a securities brokerage house in Beijing on Friday. Photo: Simon Song

CSRC chief Xiao Gang: the accidental banker and the Chinese stock market circuit breaker

(140311) -- BEIJING, March 11, 2014 (Xinhua) -- Xiao Gang, president of China Securities Regulatory Commission, speaks at a press conference for the second session of China's 12th National People's Congress (NPC) on financial reform in Beijing, capital of China, March 11, 2014. (Xinhua/Wang Peng) (zkr)

CSRC chairman Xiao Gang started out in the industry working as the secretary for Lu Peijian, the sixth governor of the People’s Bank of China. Photo: Xinhua

A trillion-dollar question on China’s forex dilemma: just how low should its reserves go? 

A clerk counts Chinese yuan and U.S. dollar banknotes at a branch of Bank of China in Taiyuan, Shanxi province, China, January 4, 2016. REUTERS/Jon Woo CHINA OUT. NO COMMERCIAL OR EDITORIAL SALES IN CHINA. TPX IMAGES OF THE DAY

A man walks past an advertisement promoting China's renminbi (RMB) or yuan, U.S. dollar and Euro exchange services at foreign exchange store in Hong Kong, China, August 13, 2015. German Bund yields edged up on Thursday following efforts by China's central bank to slow a sharp descent of the yuan that has prompted investors this week to seek safe-haven assets. REUTERS/Tyrone Siu

China still has plenty in reserve – at least for now – and Beijing is willing to use it. Photo: Reuters

Chinese scramble to safety of US dollar as yuan weakens and forex reserves drop

A clerk counts U.S. dollar banknotes after counting Chinese 100 Yuan banknotes at a branch of the Agricultural Bank of China in Qionghai, China's southmost Hainan province, in this November 12, 2012 file photo. REUTERS/China Daily/Files CHINA OUT. NO COMMERCIAL OR EDITORIAL SALES IN CHINA

The State Administration of Foreign Exchange has ordered banks in some areas to limit US dollar purchases this month to curb outflows. Photo: Reuters

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Securities chief under growing pressure as the authorities battle to restore confidence in a beleaguered market that sent shock waves around the world


Chinese stocks steady after another fresh state injection to prop up prices

.css-1c6uqr6{color:inherit;font-weight:inherit;font-size:inherit;font-family:inherit;line-height:inherit;overflow-wrap:break-word;}Securities chief under growing pressure as the authorities battle to restore confidence in a beleaguered market that sent shock waves around the world

Securities chief under growing pressure as the authorities battle to restore confidence in a beleaguered market that sent shock waves around the world