Chi­nese PM raps reg­u­la­tors for mis­han­dling stocks, yuan rout

The Pak Banker - - COMPANIES/BOSS -

Chi­nese Premier Li Ke­qiang took the na­tion's fi­nan­cial reg­u­la­tors to task for the way they han­dled a rout in stocks and the yuan, mak­ing him the most se­nior of­fi­cial to date to fault the re­sponse to the tur­moil.

Reg­u­la­tors didn't re­spond ac­tively to de­clines and some even have man­age­ment prob­lems, Li said in a State Coun­cil meet­ing, ac­cord­ing to a re­port car­ried on the govern­ment's web­site.

Li didn't spec­ify the reg­u­la­tors at fault and de­fended the de­ci­sion to in­ter­vene in equity and for­eign-ex­change mar­kets as nec­es­sary to head off sys­temic risks and "defuse some bombs."

"Look­ing back, the ma­jor re­spon­si­ble de­part­ments took in­ad­e­quate ac­tions and had in­ter­nal man­age­ment is­sues," Li said. "It was a cor­rect strat­egy to take mar­ket­sta­bi­liz­ing mea­sures against un­usual move­ments in stocks and the cur­rency last year." The China Se­cu­ri­ties Reg­u­la­tory Com­mis­sion has drawn crit­i­cism re­cently over a se­ries of steps such as a cir­cuit­breaker sys­tem that had to be re­scinded just four days af­ter it was in­tro­duced in Jan­uary. The CSRC's chair­man, Xiao Gang, blamed fac­tors in­clud­ing in­com­plete trad­ing rules and an in­ap­pro­pri­ate reg­u­la­tory sys­tem, and said of­fi­cials will learn from their mis­takes. China's stock mar­ket has be­come one of the most vis­i­ble sym­bols of the govern­ment's strug­gle to win back in­vestor con­fi­dence. Af­ter cheer­lead­ing by state me­dia helped fuel an un­prece­dented boom in main­land shares last sum­mer, the mar­ket crashed as reg­u­la­tors failed to man­age a surge in lever­aged bets by in­di­vid­ual in­vestors.

In­creased in­ter­ven­tion has con­tra­dicted govern­ment pledges to move to a more mar­ket-based econ­omy, while the per­cep­tion by some for­eign in­vestors that pol­icy mak­ers are mis­han­dling the volatil­ity in fi­nan­cial mar­kets is height­en­ing con­cern that the deep­est eco­nomic slow­down since 1990 will worsen.

Li is sig­nal­ing "a more uni­fied fi­nan­cial reg­u­la­tory frame­work to be dom­i­nated by the cen­tral bank," said Dai Ming, a fund man­ager at Heng­sheng As­set Man­age­ment Co. in Shang­hai. "With the emer­gence of fi­nan­cial de­riv­a­tives prod­ucts, the dif­fi­culty of reg­u­la­tory over­sight is in­creas­ing and it's nec­es­sary to cre­ate a co-or­di­na­tion sys­tem within govern­ment de­part­ments."

The bench­mark Shang­hai Com­pos­ite In­dex has tum­bled more than 40 per­cent since a June high even af­ter state funds spent bil­lions of dol­lars to prop up eq­ui­ties. The govern­ment also tight­ened cap­i­tal con­trols and spent al­most $300 bil­lion of its for­eign ex­change re­serves in the last three months to prop up the ex­change rate. The yuan posted its big­gest ad­vance in more than a decade on Mon­day in Shang­hai af­ter cen­tral bank Gov­er­nor Zhou Xiaochuan voiced his sup­port for the cur­rency.

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