China stock market

China’s securities regulator fumbles as it scrambles to talk up a plunging stock market

  • CSRC says it will raise company quality, optimise trading oversight and encourage long-term investment
  • CSRC makes rare market-stabilising comments in trading hours
PUBLISHED : Tuesday, 30 October, 2018, 12:46pm
UPDATED : Tuesday, 30 October, 2018, 10:55pm

China’s securities regulator stepped into a tumbling stock market to assure frayed nerves, but stumbled in its attempt by misspelling the name of its supervising body, creating confusion - at least for a few hours - for investors in the world’s second-largest capital market.

Less than an hour into the fourth day of declines on the Shanghai Stock Exchange on Tuesday, the China Securities Regulatory Commission (CSRC) published a four-line statement on its WeChat social media account, vowing to support share buy-backs, mergers and acquisitions in the capital market, acting in accordance with its supervising agency.

The CSRC comment is the latest in a deluge of measures by China’s regulators overseeing the stock market and the finance industries after Vice-Premier Liu He this month voiced his support of the nation’s stock market.

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So far, the Chinese legislature has revised law clauses to make share buy-backs easier, the central bank has pledged more funding support of companies grappling with liquidity crunch and the CSRC has allowed brokerages and private-equity firms to invest in cash-strapped companies.

“The CSRC is doing that to stabilise the market,” said Wu Kan, an investment manager at Soochow Securities in Shanghai. “But that’s more symbolic as it simply repeats what it always says. That may work temporarily to put a floor under the market, but the real market bottom may still be some distance from us.”

The statement was an unusual step for a regulator that usually takes great pains to issue pronouncements outside trading hours, and which in fact reprimands companies for announcing market-sensitive news while transactions are ongoing.

By the early afternoon, the statement had gone missing from the regulator’s WeChat account, causing confusion among investors. Two hours went by before the statement was republished.

What changed between the two statements was the name of the powerful agency headed by Vice Premier Liu, whose expanding portfolio of jobs include overseeing the securities regulator. The agency is called the Financial Stability and Development Committee (FSDC). The regulator had dropped the “D” from its first statement, essentially misspelling the name of its boss.

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The snafu underscores how Liu’s team is the de facto financial and economic authority in China, responsible for executing the strategies and directives of the president, even if the FSDC is a consultative body in name.

The flip-flop created confusion and invited howls of protest from China’s internet users, who criticised the regulator for its “bad management” and “unprofessional” behaviour.

“Being reckless on such an important statement, have you ever consider the feeling of the market or the result? Who gives you the power to do so,” said a netizen.

China’s stock market appeared to have been consoled by the regulator’s gesture. The Shanghai Composite end three days of losses, making its biggest one-day percentage gain in six trading days. On the Shenzhen exchange, the main benchmark rose almost 1 per cent, ending five consecutive days of losses.

The market was also buoyed by comments overnight by US President Donald Trump, who said in an interview on Fox Television that he thinks he will “make a great deal with China” when he meets Chinese President Xi Jinping in November at the G20 meeting in Buenos Aires.

“I think we will make a great deal with China and it has to be great... because they’ve drained our country,” Trump said in the interview. Asked how confident he is in reaching a deal, Trump said: “I can make a deal right now - I’d just say they’re not ready.”

[Editor’s note: US President Donald Trump’s relevant comments begin at 18’40”]