New stock market regulations unveiled

By Xie Jun Source:Global Times Published: 2015-4-19 22:23:01

Move not an effort to restrain recent surge: CSRC


China announced new stock market regulations on Friday, triggering concerns that it might be a deliberate effort to control the continuing surge in the market.

The regulations - which were jointly released by the Securities Association of China, the Asset Management Association of China, the Shanghai Stock Exchange and the Shenzhen Stock Exchange - come at a time of soaring performance by the mainland stock exchanges.

The Shanghai Composite Index reached a new seven year-high on Friday, closing at 4,287.30 points.

The new regulations called on Chinese securities companies to optimize market transaction methods and lower loan costs.

They also prohibited securities firms from participating in or providing easy access to umbrella-type trusts or over-the-counter market trading.

According to data provided by the Shanghai and Shenzhen stock exchanges, the scale of margin trading and securities lending had reached 1.155 trillion yuan ($186.45 billion) by Friday.

Margin trading is an investment tactic in which an investor borrows money from brokerages to purchase and sell shares, and securities lending involves an investor borrowing stocks to sell.

The new regulations have triggered concerns that the authorities are trying to curb the rise in the stock market.

In a survey conducted by Haitong Securities and released on Friday, 46 percent of respondents thought the regulations were a deliberate effort to cool the market.

Qiu Yanying, investment director at China Fortune Securities, told the Global Times on Sunday that the intention of such policies might be to cool down the stock market, but they would not have a lasting effect.

"The new regulations might cause share prices to decline, but not on a long-term basis," Qiu noted. "Earlier this year, the market movement following news of a government investigation of margin trading only lasted one day." 

On Saturday, Deng Ke, spokesman for the China Securities Regulatory Commission, rejected market concerns about the new guidelines.

"The aim of the requirements is not to clamp down on the Chinese stock market," Deng said.

Instead, the regulations are in line with China's efforts to "improve its market stability mechanism, perfect its market transaction mechanism and enrich its market risk management tools," said Deng

"They aim at balancing the development of margin trading and securities lending in China, as well as maintaining the stability and health of the market," he noted.

Qiu said that although the regulators were trying to find a balance, the development of margin trading and securities lending is more likely to be guided by market principles.



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