SHANGHAI: Chinese stock traders want Beijing to create a super-regulator to take over the investor relations and communication duties of existing regulators, which they say have co-ordinated poorly in their handling of the country’s stock market crash.
Traders say a lack of co-ordination among the regulators had heightened investor uncertainty and contributed to the crash’s severity.
In June, when there was huge seasonal demand for cash ahead of the end of the first half of the year, the China Securities Regulatory Commission (CSRC) was cracking down on margin trading and using large numbers of initial public offerings (IPOs) to cool the red-hot stock trading.
Simultaneously, the People’s Bank of China (PBoC) stopped offering short-term funds via its open market operations and did not extend some expiring loans to banks.
These apparently uncoordinated tightenings jointly sparked worries that contributed to the stock market crash. Chinese stocks have fallen more than 30% since a peak on June 12.
“Only a super coordinator senior to the ‘one bank, three commissions’ can partially help avoid a repetition of the blunders,” said a trader at a Chinese commercial bank, referring to how China has one central bank and three market-regulating commissions.
Having one authority in charge of regulation “has been discussed for many years, but the state appears to be lacking the will to implement the plan,” he said.
China first discussed a super “state financial stability commission” during the global financial crisis but traders say the idea has gone nowhere, partly due to competition for turf among the PBoC, and the securities, banking and insurance commissions.
The recent margin trading clamp down had a particularly big impact, with investors who had borrowed to trade stocks panicking and selling them aggressively. — Reuters
Did you find this article insightful?