China stocks: Swinging back to market forces?

One can only assume that after the stock market crash this summer, the Chinese securities regulator is ready for a vacation.

So, on Friday, the China Securities Regulatory Commission addressed a news conference in Beijing to say it would be removing some of the scaffolding it had erected to support the stock market.

Specifically, it’s going to allow market forces to play a bigger role in determining stock prices.

“With market fluctuations gradually shifting to normal, from wild and abnormal, we should let the market exercise its function of self-adjustment,” said the market watchdog, according to Reuters.

Of course, this being China, the government reserves the right to intervene whenever it feels necessary to maintain stability.

The regulator added that China Securities Finance Corp. (CSF) — the state margin lender that was tasked with buying shares during the market slump — would continue to play its stabilizing role for the next few years, according to Reuters.

The CSRC did not say whether it would halt any specific forms of intervention, reported Reuters. However, the CSRC did say that CSF has recently transferred some shares it bought during the sell-off to Central Huijin, an investment unit of sovereign wealth fund China Investment Corp., and Huijin will become a long-term holder in those stocks.

To see how this plays on the stock market, one will have to wait for Monday’s session.

Meanwhile, on Friday, the Shanghai Stock Exchange Composite Index inched up 0.3% to 3,965, and the Shenzhen Stock Exchange Composite Index added 0.5% to 2,310. The small-cap Chinext Price Index slipped 0.4% to 2,674 and Hong Kong’s Hang Seng Index inched 0.1% lower to 23,991.



Categories: Asia Unhedged, China

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