The Financial Stability and Development Committee on Dec 20 said China’s stocks have started to show promising signs of becoming valuable long-term investments, sending a positive signal to investors who are jittery about performance of the domestic A-share indexes in the year ahead.
It also said that the regulator will reduce “administrative intervention” in market transactions, wording that was believed to be behind the rally of the A-share indices in the afternoon trading.
The capital market is ready for further reform efforts, according to a statement issued by the People’s Bank of China after the meeting.
The government will improve regulation of listed firms and strengthen delisting and information disclosure systems to build a market-based capital market, according to the statement.
Financial regulators will widen channels for more asset management products to enter the stock market, according to the statement.
The benchmark Shanghai index had slumped by about 30 percent by Dec 20 from the peak of the year at 3587.03 in late January. But it managed to rally and recover most of the losses on Dec 20 despite pressure from slumping stock indexes in developed markets.
The pledge to slash regulation currently restricting the entry of asset management products can inject some confidence into the market at the year-end amid pessimistic outlook, as the move is expected to channel long-term funds into China’s stock market, said a Beijing-based asset manager of a commercial bank, who declined to be named.
But it may take quite some time to see more capital inflows because the entry of asset management products need to get approval from the securities regulator, and requires more detailed guidelines and standards to ensure stable funding support for listed companies, according to the manager.
Jiao Jinhong, chief lawyer with the China Securities Regulatory Commission, said during the Guoshi Forum on Dec 20 that the commission will roll out more reform measures to ensure regulation keeps pace with the evolving market.
The most urgent tasks for improving legislation related to the capital market include revision of the Company Law and the Securities Law. Such efforts will pave the way for future moves to open the door wider to foreign market participants, Jiao said.
Amid downward risks, China has maintained a steady pace in promoting opening-up of the capital market, offering foreign investors wider access to one of the world’s largest capital markets.
Some 286 overseas institutions had received quotas amounting to $100.56 billion by the end of November, up $300 million compared with the end of October under China’s Qualified Foreign Institutional Investors (QFII) program, which allows for more convenient capital inflows, data from the State Administration of Foreign Exchange show.