Stocks regulator rules out withdrawing government cash used to shore up China’s share markets during trading rout
The mainland’s newly appointed chief stocks regulator said yesterday the government would not withdraw the capital injected to shore up the country’s share markets in the near future.
Analysts said Liu Shiyu’s comments were aimed at boosting confidence in the nation’s stock markets amid continued volatile trading in recent months.
“In quite a long time in the future it would be immature to talk about withdrawing market-saving capital,” he told a press conference on the sidelines of a meeting of the government’s main political advisory body in Beijing.
The China Securities Regulatory Commission led a campaign from July last year to shore up share prices after they plummeted last summer.
Goldman Sachs estimated last September that authorities injected more than 1.5 trillion yuan (HK$1.8 trillion) to prop up the market by buying shares.
Liu also said in his first press conference as head of the commission that there were no plans to reintroduce a circuit-breaker mechanism that added to turmoil in share trading on the mainland earlier this year.
Liu blamed the mechanism for “accelerating market plunges”.
The mechanism was designed to halt or suspend trading if the main index swung beyond set limits. But the scheme was scrapped in January after only four days as it was blamed for increasing tension and volatility.
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Harrison Hu, a senior analyst at Guotai Junan Securities in Shanghai, said Liu’s pledge not to remove government cash would be welcomed by investors.
“His statement on dealing with market-saving capital removed a big uncertainty,” he said.
“There is no other choice except to maintain stability on the markets for now, but how to develop this after only temporary stability is still worrying.”
The mainland’s stock markets have gone through the most volatile sessions on record from late 2014 to early this year, amid lingering concerns about economic slowdown and allegations of confused policy moves.
Liu also said the much-awaited introduction of a registration-based system for new company share listings on stocks markets would take “quite a long time” to prepare, although it remained a “must do” for the regulator.
Liu added that the authorities should unswervingly move towards making the mainland’s capital markets more market-oriented, but should step in decisively if they don’t work properly.
According to the Beijing Youth Daily, Liu also said that the Shenzhen-Hong Kong stock connect would “certainly” start within this year.
Shang Fulin, chairman of the China Banking Regulatory Commission, said risks over debt levels were “under control” in the banking system.
“Recently some rating agencies downgraded the outlook on China’s sovereign credit and some banks’ credit. It is an obvious misjudgement,” Shang said.
But he admitted that the non-performing loan ratio had risen to 1.67 per cent in the banking sector by the end of last year.
Xiang Junbo, chairman of the China Insurance Regulatory Commission, said the risks in universal life insurance products were also “under control”, but the regulator would carry out a review of the business in the short term.
