Chinese censors wipe out discussions about stock market rout as key index tumbles past 2015 low
The China Securities Regulatory Commission, in a memo dated September 7, has asked mutual funds and brokerages from making public comments that hurt the stock market and spread chaos
The mainland’s securities regulator is making renewed efforts to stabilise the weak stock market amid heightened fears over the escalating US-China trade war, instructing fund managers and analysts from talking down shares after some of their pessimistic views have triggered panic among investors.
The China Securities Regulatory Commission (CSRC) distributed a memo, dated September 7, to financial institutions, including mutual funds and brokerages, instructing them to avoid making public comments that “lack professional prudence and substantial understanding of the market conditions”, according to the document obtained by the South China Morning Post.
Some of the views “have badly tainted the reputation of the companies and caused a disorder in the market with huge negative impact”, the memo added.
In the first eight months of this year, the benchmark Shanghai Composite Index has slumped 17.6 per cent, resulting in a new round of crisis of confidence in the market where millions of retail investors spend years of savings to chase short-term gains from share price swings.
The key indicator hit a three-year low on Monday battered by fears of a move by the US President Donald Trump to impose tariffs on another US$200 billion worth of Chinese imports, ending at 2,651.79.
The index, however, has risen over the past two sessions after China slapped retaliatory tariffs on US$60 billion of US goods and plans to inject stimulus to spur economic growth amid fears of a slowdown because of the trade war.
“Social media has helped negative comments spread quickly and that is a big concern among regulators when they step in to soothe disappointed investors,” said Shen Ye, a Shanghai-based hedge fund manager. “But the censorship will not effectively stem the slide since worries about slowing economic growth and trade war will cause damages to business operations.”
China’s securities regulator has been tasked with stabilising the market to avoid social chaos because small investors, after suffering heavy losses, could take to the streets to protest against the government’s failed efforts to safeguard their interests.
A stock market rout in mid-2015 that wiped out as much as US$5 trillion market capitalisation prompted Beijing to shell out at least 1.5 trillion yuan (US$219 billion) of rescue funds to buoy the falling stocks.
The CSRC in a bid to shore up investor confidence recently issued a series of recommendations, encouraging listed companies to buy-back their shares and has also slowed initial public offering approvals.
Hengsheng Asset Management predicts the Shanghai benchmark may drop a further 10 per cent after the US proposed duties on another US$200 billion worth of products on Tuesday.