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Tuesday 9 December 2008
Regulator ‘working hard’ to push through launch of index futures
The country’s securities regulator was making a concerted effort to pave the way for the debut of the long-delayed stock index futures, a senior official said.
Regulator ‘working hard’ to push through launch of index futures
Daniel Ren in Shanghai 8 December 2008
The country’s securities regulator was making a concerted effort to pave the way for the debut of the long-delayed stock index futures, a senior official said.
However, sources said it might take time before the equity-based derivative was introduced as the global financial turmoil had made state leaders leery of capital market liberalisation.
Jiang Yang, an assistant to China Securities Regulatory Commission chairman Shang Fulin, said last week that the watchdog was working hard to prepare for the launch of the contract and would create an environment in which it could operate.
A correct reading of Mr. Jiang’s remark is that the CSRC hopes to stabilise the volatile stock market before reform is conducted.
The regulator is desperate to save face after an almost two-year delay.
The CSRC and Mr. Shang have been under fire since last year over the failure to launch the derivative. Indeed, the technical system is already in place.
“We understand the securities regulator still wants to push through market liberalisation,” said Li Liejun, an official at Shanghai Jinpeng Futures. “But it’s up to the higher-level officials, probably the state leaders, to make a final decision.”
The CSRC had planned for index futures trading to start last year but it was postponed, citing technical difficulties. The trade allows investors to bet on a downturn in equity market to make profits.
The delay resulted with the State Council finally deciding to put the plan on hold amid the boom-to-bust cycle on the Shanghai and Shenzhen stock exchanges.
Beijing has been striving to stem a slide that has seen more than 60 per cent of market capitalisation evaporate since October last year.
Investors are eager to dump shares as they foresee a further decline amid a crisis of confidence.
Government officials believe the introduction of short-selling will add to the market turbulence, which could eventually undermine the country’s capital market.
Indeed, the market’s roller-coaster ride marks it out as a slowing economy and will lead to poor corporate earnings in the coming quarters.
Beijing is wary of a steeper drop on the equity market if short-selling is approved.
Recently, Beijing made another U-turn on margin financing and short-selling as officials were concerned by fears of a market collapse.
The CSRC had been expected to select a few brokerages to use the mechanism in a pilot scheme late last month, but the State Council put the plan on hold, requiring the securities regulator to take a slower approach.
Sources said officials including Vice-Premier Wang Qishan were worried that short-selling would become rampant amid the battered stock market.
Mr. Wang implied the stock market would stabilise soon and then the timing would be ripe for index futures, analysts said.
Sources said Mr. Wang, as an early advocate for the derivatives, was determined to push ahead with the reform, though his verbal support did not necessarily mean the contract would arrive any time soon.
“Financial innovations shouldn’t be linked to the direction of the market,” said Guotai Junan Securities analyst Zhang Kun. “Government officials’ whims only cause more confusion in the market.”
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Regulator ‘working hard’ to push through launch of index futures
Daniel Ren in Shanghai
8 December 2008
The country’s securities regulator was making a concerted effort to pave the way for the debut of the long-delayed stock index futures, a senior official said.
However, sources said it might take time before the equity-based derivative was introduced as the global financial turmoil had made state leaders leery of capital market liberalisation.
Jiang Yang, an assistant to China Securities Regulatory Commission chairman Shang Fulin, said last week that the watchdog was working hard to prepare for the launch of the contract and would create an environment in which it could operate.
A correct reading of Mr. Jiang’s remark is that the CSRC hopes to stabilise the volatile stock market before reform is conducted.
The regulator is desperate to save face after an almost two-year delay.
The CSRC and Mr. Shang have been under fire since last year over the failure to launch the derivative. Indeed, the technical system is already in place.
“We understand the securities regulator still wants to push through market liberalisation,” said Li Liejun, an official at Shanghai Jinpeng Futures. “But it’s up to the higher-level officials, probably the state leaders, to make a final decision.”
The CSRC had planned for index futures trading to start last year but it was postponed, citing technical difficulties. The trade allows investors to bet on a downturn in equity market to make profits.
The delay resulted with the State Council finally deciding to put the plan on hold amid the boom-to-bust cycle on the Shanghai and Shenzhen stock exchanges.
Beijing has been striving to stem a slide that has seen more than 60 per cent of market capitalisation evaporate since October last year.
Investors are eager to dump shares as they foresee a further decline amid a crisis of confidence.
Government officials believe the introduction of short-selling will add to the market turbulence, which could eventually undermine the country’s capital market.
Indeed, the market’s roller-coaster ride marks it out as a slowing economy and will lead to poor corporate earnings in the coming quarters.
Beijing is wary of a steeper drop on the equity market if short-selling is approved.
Recently, Beijing made another U-turn on margin financing and short-selling as officials were concerned by fears of a market collapse.
The CSRC had been expected to select a few brokerages to use the mechanism in a pilot scheme late last month, but the State Council put the plan on hold, requiring the securities regulator to take a slower approach.
Sources said officials including Vice-Premier Wang Qishan were worried that short-selling would become rampant amid the battered stock market.
Mr. Wang implied the stock market would stabilise soon and then the timing would be ripe for index futures, analysts said.
Sources said Mr. Wang, as an early advocate for the derivatives, was determined to push ahead with the reform, though his verbal support did not necessarily mean the contract would arrive any time soon.
“Financial innovations shouldn’t be linked to the direction of the market,” said Guotai Junan Securities analyst Zhang Kun. “Government officials’ whims only cause more confusion in the market.”
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