China’s regulator quietly removes capital-sapping CDRs as it vows reforms to soothe frayed nerves
China’s stock market has lost US$2 trillion in value since the benchmark index fell 24 per cent from a January high
China’s securities regulator quietly removed an ambitious and controversial financial instrument from its agenda as it seeks to soothe frayed nerves in the country’s second bear market since 2012.
The regulator will commence by the end of 2018 a cross-border investment channel called the London Stock Connect, which will enable Chinese investors to trade in London-listed equities, and for UK investors to buy Chinese stocks.
Liu Shiyu, chairman of the China Securities Regulatory Commission (CSRC), has good reason to tread with trepidation. Chinese equities have lost a combined US$2 trillion in value since January, last week ceding the title of the world’s second-largest capital market to Japan.
The Shanghai Composite Index was down this month by as much as 24 per cent from its January high, landing Chinese equities in their second bear market since a 2015 stock rout.
“Investors’ confidence has been pretty fragile over the past two months,” said Wu Kan, a fund manager at Shanshan Finance in Shanghai. “Investors have been disappointed by the lack of progress in the fundamental development of the capital market, such as the procedures for delisting bad companies and further liberalisation. Now, the regulator is doing something we want to see: improve the quality of both listed companies and investors.”