Chi­nese in­vestors wel­come new reg­u­la­tor, await new reg­u­la­tions

The Pak Banker - - MARKETS/SPORTS -

China's new se­cu­ri­ties reg­u­la­tor Liu Shiyu, a for­mer cen­tral banker, has a tough job on his hands - not least man­ag­ing a huge weight of ex­pec­ta­tion from mil­lions of small in­vestors smart­ing from a re­cent stock mar­ket col­lapse. Liu, ap­pointed at the week­end to re­place Xiao Gang, the scape­goat of the piece, in­her­its the fall­out from near 50 per­cent drops in China's ma­jor in­dexes from peaks in June, blamed on a con­flu­ence of mis­takes made by mul­ti­ple reg­u­la­tors.

While Liu has no ex­pe­ri­ence in the se­cu­ri­ties busi­ness and his cur­ricu­lum vi­tae reads much like Xiao's - and other pre­vi­ous heads of the China Se­cu­ri­ties Reg­u­la­tory Com­mis­sion (CSRC) for that mat­ter - some su­per­sti­tious 'ne­ti­zens' are pin­ning their faith on his birth sign.

They note he was born un­der the Chi­nese zodiac sign of the Bull, and have made word plays rhyming his fam­ily name, which sounds like the Chi­nese word for ox.

"The chair­man's sign is the Bull; how could the A-share (main­land) mar­ket not be­come bullish?" Li Dax­iao, chief econ­o­mist of Yingda Se­cu­ri­ties, wrote on his mi­croblog.

Mon­day, the first day's trad­ing since his ap­point­ment, the blue-chip CSI300 in­dex .CSI300 rose to its high­est in al­most a month.

A Chi­nese mi­croblog fo­rum was flooded with pic­tures of peo­ple hold­ing up their stock mar­ket wish-lists for Liu - from the tech­ni­cal, such as re­viv­ing the sup­pressed in­dex fu­tures mar­ket, to the di­rect: "Sur­pass 6,124", de­manded one woman, re­fer­ring to the record high the Shang­hai Com­pos­ite In­dex struck in 2007.

"Let me make a load of money so I can find a good wife," urged an­other poster. Few an­a­lysts, how­ever, ex­pect much rad­i­cal re­form from Liu in the near term, nor does his ap­point­ment nec­es­sar­ily sig­nal a dra­matic change in ap­proach from Bei­jing.

Liu, a for­mer deputy cen­tral bank gov­er­nor and a top of­fi­cial at a state-con­trolled bank, has to walk the same pol­icy tightrope on which Xiao tripped and fell, ac­cord­ing to in­vestors, who blame a se­ries of pol­icy mis­steps for over­heat­ing a mar­ket rally and ag­gra­vat­ing the en­su­ing crash.

It will also be dif­fi­cult for a political ap­pointee to over­come re­sis­tance from mid-level CSRC of­fi­cials who fear their power will be di­luted, an­a­lysts said. As in any govern­ment bu­reau­cracy, many CSRC of­fi­cials will be re­luc­tant to give up their in­flu­ence, such as over which com­pa­nies get to con­duct a stock mar­ket list­ing and when.

"It's ir­ra­tional to ex­pect that chang­ing the chair­man would have an im­pact on the mar­ket," said Chen Long, an­a­lyst at Gavekal Drago­nomics in Bei­jing. "The in­sti­tu­tion needs to be changed, not the chair­man."

The CSRC did not re­spond to re­quests by fax and tele­phone seek­ing com­ment. "Peo­ple al­ways be­lieve new of­fi­cials are like a new broom," said Zhao Yayun, se­nior re­searcher at the Chongyang In­sti­tute for Fi­nan­cial Stud­ies in Bei­jing. "To re­store con­fi­dence, he (Liu) needs to roll out some ex­cit­ing re­form mea­sures."

On his ' To Do' list, Liu has to restart a stalled re­form process, with com­mit­ments to lib­er­al­ize rules on ini­tial pub­lic of­fer­ings and re­vive de­riv­a­tives mar­kets to im­prove in­vestors' abil­ity to hedge against down­side risks, in­vestors say.

Such hedg­ing was set in re­verse dur­ing the 2015 crash in the name of pur­su­ing what the govern­ment re­ferred to as "ma­li­cious" short sellers, which in­vestors saw as a way for the govern­ment to ap­ply pres­sure on them to buy and hold.

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