CSRC under pressure as investors bemoan latest source of stock market blues

China’s stock markets remain in gloomy territory, with the primary Shanghai Stock Exchange Composite Index plummeting 200 points from close to 3,300 points earlier in April. In only two weeks, trillions in paper wealth has been erased.

The bearish run has disenchanted tens of millions of Chinese and foreign investors. Particularly worth noting is that the recent stock market downturn has seen market insiders and trading house analysts expressing their displeasure and ire with the regulator – the China Securities Regulatory Commission ( CSRC) – which is considered to have acted excessively in its attempt to curb stock bubbles.

It needs to be pointed out that the markets have remained jittery since the crash in the summer of 2015 and the authorities have been cautious. They should continue with their efforts to foster long- term investment and to ease uncertainty for investors.

In the light of the decision, announced on April 1, to initiate the “Xiongan New Area” – a planned modern urban expanse and a cluster of high- tech assembly lines, about 150 kilometers south of Beijing – related shares in listed companies based in Hebei Province, Beijing and Tianjin municipalities surged.

But the CSRC, which was reportedly concerned about a sudden frenzy for so- called “Xiongan stocks,” ordered a trading moratorium on two dozen of the stocks. As a result, investors’ enthusiasm was watered down, leading to the downturn in the broader market.

Also, the CSRC’s ambiguity on whether it will come out with a stock registration system – in which a company needs only to file required documents with the CSRC detailing the particulars of a proposed public offering, unlike the current IPO approval regime – has caused volatility in the market.

Uncertainty is the biggest enemy for the stock market. The market’s message is loud and clear that more clarity and less flip- flopping on policy is needed. Incessant market turmoil suggests that nobody really knows what the CSRC policy is, or even if the CSRC itself knows.

The losing streak in April also came against the backdrop of China’s top leadership calling on finance- realm officials and regulators in the country to institute a “red line” to prevent systemic risk by whatever means necessary. Chinese President Xi Jinping said earlier this week in Beijing that financial security is an important part of national security.

The rising stock market volatility and constant market dives have a negative impact on the economy, dampening consumer sentiment and creating a liquidity crunch for the banking system. As a consequence, the basis for stable and healthy economic growth is threatened. Reform efforts by the stock market regulator should not come in a way that trigger market panic.

The author is an editor with the Global Times. bizopinion@ globaltimes. com. cn