‘Broker butcher’s’ bold steps to breathe life into China’s moribund stock market
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Since Wu Qing’s appointment as chairman of the China Securities Regulatory Commission (CSRC) in February, benchmarks tracking China’s yuan-traded onshore stocks have risen by over a tenth from their lows. Overseas investors are now taking a more favourable view of the world’s second-largest stock market because the new regulations lower the threshold for and strengthen regulations on delisting, raise the bar for new listings and strengthen oversight of high-frequency trading and the mutual-fund industry. Wu’s elixir for reviving the ailing stock markets is a cocktail of state intervention, strict law enforcement and tougher crackdowns on offences ranging from fraudulent listings to stock-price manipulation. Despite these gains, Chinese stocks remain undervalued, reflecting in part the investor hesitancy. Wu believes in state intervention and proclaimed in his first press conference that it was necessary and justified in times of “market dysfunction”. Wu's focus on investor protection has impressed the market. The CSRC has issued a slew of draft rules seeking to raise the bar for company listings and tighter oversight of high-frequency trading. The watchdog has pledged tougher new listing rules, especially for companies that have not turned profitable, as well as more on-site inspections of listing candidates’ financial records. It is also seeking to moderate the supply of new shares while encouraging share buy-backs and dividend payouts to enhance shareholder returns. Wu's image as a hawkish regulator stands in sharp contrast with his predecessor Yi Huiman, whose policy approach seemed to be milder. Wu, a veteran financial industry regulator, gained the sobriquet of “broker butcher” for spearheading the closure of more than 20 insolvent domestic securities firms in the aftermath of the 2008 global financial crisis. With the re-rating of the market spurred by the state intervention having run its course, Wu now faces the challenge of further restoring investor confidence and sustaining the market rebound.
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