After a turbulent year, A-shares set to shine

Afriend of mine told me that he hasn’t checked his stock account for so long that he nearly forgot his account password. He said he hadn’t given up on the market, but simply wanted to play it as a long-term game.

The rollercoaster ride of the stock market since the summer of last year has made many retail investors grow tired of obsessively checking stock prices and constantly worrying about whether they would miss any opportunity to make profits.

Many of them learned the lesson the hard way, after the dramatic market rout in 2015 that wiped out nearly 40 percent of the market value. They came to realize how dangerous it was to buy and sell on rumors and speculative instinct. They understood how risky it was to use leverage to trade stocks.

So did the regulators. In 2016, the market had a new securities chief, Liu Shiyu, who vowed to crack down on illegal market activities, improve market transparency and to ensure fair play in the market.

We have seen a greater number of investigations and punishments for market manipulation and insider trading this year. There has also been stronger enforcement of proper information disclosure rules by listed companies, to ensure every investor obtains the necessary information on an equal basis.

In the past year, the Chinese stock market made progress toward becoming more international and more accessible to overseas investors, with the long-awaited launch of the Shenzhen-Hong Kong Stock Connect in December.

But there were also disappointments. The A-shares were once again rejected by MSCI Inc for inclusion in one of its key international benchmark indexes. Domestic reforms toward a registration-based share sale scheme and the long-awaited amendment of the country’s Securities Law were delayed due to the market turbulence.

The latest wave of speculative stock trading and the aggressive stake bidding by insurance funds have also led to rising market volatility and caused deeper concerns about what kind of role institutional investors should play.

Nonetheless, as Chinese investors become more sophisticated, the expectation is that they will ensure the market infrastructure is further improved with greater transparency and less illegal and speculative behavior. There is also hope for the rule of law to play a greater role in the market, which will be the ultimate source of confidence for investors in the coming year.