Mainland China’s new securities chief details tasks facing senior regulatory officials

Mainland China’s new chief securities regulator, Liu Shiyu, gave his first speech to his new subordinates on Tuesday, but analysts say they are concerned about their capabilities and suggest the authorities “stay away” from the markets.

Liu, formerly chairman of Agricultural Bank of China, became the eighth chairman of the China Securities Regulatory Commission (CSRC) on Saturday, 26 years after the birth of the mainland stock market, replacing Xiao Gang.

In his speech to senior CSRC officials on Tuesday, Liu said its main tasks included strictly supervising the market and checking for market manipulation, as well as actively guiding funds into the stock market, Bloomberg reported.

However, analysts said Liu was facing the toughest job in the world in trying to fix mainland China’s stock markets, a roller-coaster-style playground crammed with unprofessional retail investors and many vested interests.

“Liu’s first internal statement seems in line with the CSRC tradition – fighting back against market wrongdoing, propping up share prices by introducing more liquidity in the markets,” a Guangzhou-based brokerage analyst said. “The pledges have been made for decades and see what is going on in the markets; you will understand how hard they are to realise.

“The CSRC, relying on it itself, has limited political capital to challenge entrenched interests.”

Chen Shuang, the chief executive of state-owned financial conglomerate China Everbright, said one of the most important things for the new chairman was to reduce intervention in the market.

“You cannot act as the referee and a player at the same time,” he said. “It is simple common sense. The problem with the CSRC is not that they are incompetent, but is that they manage too much. And sometimes their over intervention becomes the source for abnormal volatility or insider trading.

“The market has its own power and pace, and you should respect it.”

Paul Gillis, a professor at Peking University’s Guanghua School of Management, said the CSRC’s heavy-handed regulation and intervention in the market had underwritten the previous bull run in the stock market. But when stocks fell, investors tended to blame the regulator, and that had hindered market reform.

“I don’t think regulation is the big problem in the A-share market,” Gillis said. “The problem was the irrational exuberance that took the market too high.”

Retail investors are responsible for 80 per cent to 90 per cent of the turnover on China’s A-share markets.

The CSRC investigated 71 market manipulation cases last year, more than four times the number in 2014. The watchdog has focused on probing the manipulation of market information and misconduct involving algorithmic trading and margin finance since the markets crashed from a seven-year high in June.