China stock market manipulation cases surge 25pc, CSRC says

Market regulator should do more to help rebuild international confidence in the mainland stock markets, one analysts says

PUBLISHED : Tuesday, 16 February, 2016, 6:56pm
UPDATED : Tuesday, 16 February, 2016, 6:56pm

China’s top securities regulator said market manipulation cases have been on a “sharp rise” since last year, and pledged to do more to improve the supervising structure.

The Chinese Securities Regulatory Commission (CSRC) said the number of probed cases of market wrong doing increased at an annual growth rate of 25 per cent from 2012 to 2015.

Meanwhile, market manipulation cases surged by 473 per cent in 2015 on year, straining the resources of regulatory agencies charged with overseeing the markets, according to a report by the Legal Daily on Monday.

The CSRC has stepped up its monitoring activity against “market manipulation”. As part of that push the regulator has assisted the Ministry of Public Security in investigating more than 10 individuals and institutions for “malicious short selling” during the July market selloff. It’s not clear whether these investigations have concluded.

To solve improve the governing of the markets, the CSRC has urged the Shanghai and Shenzhen stock exchanges to set up independent law enforcement departments. The initiative will bolster enforcement personnel, adding about 80 officials to help oversee each market, the Legal Daily reported.

However, analysts said it was more urgent for the Chinese authorities to work to re-establish the credibility of the A-share market following the summer rout that erased billions of yuan in market value.

“The CSRC are pushing forward a credibility campaign to reassure investors in China that they are still under protection,” said Brett McGonegal, an independent market commentator and former CEO of Reorient Group.

The push comes a few months ahead of a decision by the MSCI on whether to include Shanghai shares into its global reputable emerging market index, he said.

McGonegal said in addition to improving market oversight, the CSRC needs to protect investor rights and guard against loopholes that can be exploited for “personal benefit”.

“Some people use new products (like index futures), new services (like margin lending), and new technology (like program trading) to manipulate the market. Some play tricks via cross-border tools,” CSRC was quoted as saying.