China stock market rout seen as opportunity to push reform and broaden investor base
Volatility driven by the mainland's narrow investor base, prompting calls for Beijing to accelerate opening up of the capital account
Some global investors, watching Beijing's relentless efforts to arrest a stock market rout, argue that the setback presents a great opportunity for China to speed up capital account relaxation.
Marc Desmidt, managing director at BlackRock Asset Management North Asia, said the equity rout highlighted the need to diversify the domestic investor base, currently dominated by retail investors.
"Our thesis is a market with a broad range of participants is better able to deal with more complex dynamics," he said at the Treasury Markets Summit in Hong Kong on Wednesday.
"The volatility we've seen in the [China] market to some extent is because the range of market participants is narrow. It was largely retail-based investors driving the volatility.
"It's only human nature. When you are under stress, you would turn inwards," he explained.
"But it's a fantastic time and a fantastic signal for the government to say we want to broaden the investor base and bring in a more mature, sophisticated institutional investor base. It's also sending messages that China is prepared to take constructive measures at a time of stress to continue to accelerate reforms."
Asked if recent events had led investors to lose interest in China, Desmidt said institutional investors certainly understood the long-term opportunities.