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Chinese measures successful in stabilizing stock markets

Updated: Jul 14,2015 1:57 PM     Xinhua

The policies by Chinese securities regulators have had the desired effect of stabilizing the stock markets in the country, US investors said July 13.

It is encouraging to see the regulators address the extensive use of margin, which is one of the reasons for the market’s recent dramatic fall, Brendan Ahern, chief investment officer of US fund company Kraneshares, told Xinhua.

“While brokerage margin is regulated by the China Securities Regulatory Commission (CSRC), the use of margin spread outside of traditional brokerage firms and beyond the scope of the CSRC,” Ahern said.

According to Ahern, other possible reasons included corrections for the bull market and excessive supply of IPOs, the latter of which has also been taken under control by Chinese policymakers.

Ahern’s remarks were echoed by Robert Bao, portfolio manager of Fidelity China Region Fund, which is based in the United States.

“We have a government that is highly alert and highly determined to bring stability into the marketplace,” Bao was quoted by local media as saying.

“As a long-term investor in the market, that gives the confidence that you have the government on your side to ensure that things don’t blow up,” he added.

Both investors said they believe it is still good opportunity for international investors to enter the Chinese market.

“Ultimately the reasons for investing in the onshore market remain intact: reform of state-owned enterprises, accommodating monetary policy, government policy like Belt and Road initiative, Made in China and Internet Plus,” said Ahern.

Chinese shares picked up on July 9 after a three-week losing streak. The market rallied for a third consecutive session on July 13, following recent moves by Chinese regulators, including pouring in funds and curbing illegal behavior in the marketplace.

On July 9, Chinese police joined the securities regulator to investigate “malicious short selling,” a practice held to be a big contributing factor in the market chaos. The central bank also vowed to continue to support the market’s liquidity needs.

The CSRC said on July 12 that it will crack down on illicit securities trading, adding that it will ask local authorities to verify the authenticity of securities accounts and enhance supervision.