Investors reassured with vow to continue stocks reform
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An investor sits in front of a screen at a brokage firm in Haikou, Hainan Province, on June 25. [Xinhua] |
Remarks made by China's new securities chief show the government's resolve to deepen capital market reform, analysts said on Sunday.
His comments may also help to dispel investors' concerns that the recent stock market volatility may compromise these efforts, they said.
On Saturday, Liu Shiyu, chairman of the China Securities Regulatory Commission, reassured investors that China will continue to proceed with reforms, including the registration-based initial public offering system.
Speaking at a news conference, he said the country must adopt the system eventually, but it will be a lengthy process and will be launched only when market conditions and the legal environment "are appropriate".
The planned change to a registration-based IPO system from an approval-based one has been viewed as one of the most important reforms that could help China to develop a mature and market-driven stock market.
Zhang Zhizhou, general manager of DH Fund Management Co, said: "One focus of investors' attention is whether the regulator will continue to push reforms. Liu responded to these concerns, helping to stabilize market expectations and boosting the confidence of domestic and international investors in the Chinese economy."
Liu also impressed fund managers, analysts and retail investors on Saturday as being a humorous, down-to-earth and candid person who is good at communicating with the public.
Hong Hao, chief strategist at BOCOM International, said, "Overall, his assessments are candid, but it is too early to judge his performance."
Hong said Liu's comments may indicate that the timing of the IPO reform needs to be better calculated.
According to some analysts, short-term fears over the reform are that it will influence the market by creating a huge supply of new shares.
But Hong said the source of market volatility is the high valuations of stocks, not the supply of new shares.
"The best protection is to lower the valuations to a reasonable level so that smaller investors will not have to overpay," he said.
Liu replaced Xiao Gang as CSRC chief last month. China's small investors expect him to help restore their confidence in the regulator and in the country's stock market.
Liu defended the government's role in stabilizing the market amid a dramatic slump last summer. He said the government will step in again if such a crisis re-emerges.
He also admitted that the introduction of the circuit-breaker mechanism, which was designed to stabilize the market, had aggravated its decline. The mechanism was scrapped by the commission in January after being in effect for just four days.
Liu said China will not reintroduce the mechanism in the next few years, adding that its adoption reflected a failure to fully assess the unique structure of the Chinese stock market, which is dominated by retail investors.
Wang Qing, president of Shanghai Chongyang Investment, said, "His remarks highlight the greater attention paid by the regulator to pushing reforms that fit Chinese conditions."
Wang added that Liu had also sent a message that the regulator should be the market referee, rather than a player, by saying that he would not encourage people to buy or sell stocks.
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