China has announced its plans to tighten supervision of the stock market as the recent rebound in the market has stalled. The State Council released a new guideline emphasizing the need for high-quality development of listed companies, crackdown on illegal share sales, and strengthened supervision of dividend payouts. This move comes as part of efforts to shore up the equity market.
The guideline also aims to promote the entry of medium-to-long term funds into the market, indicating a more comprehensive approach to market regulation. The statement from the cabinet reflects an elevated response compared to previous pledges, signaling a shift in regulatory stance from the top decision makers.
Yang Zhiyong, a fund manager at Beijing Gemchart Asset Management Co., noted that the regulatory stance is not solely from the securities watchdog but is a chief task coming from the top decision makers. This suggests a more stringent approach in addressing issues in the market, with expectations for more cases of punishment for IPO fraud or corruption.
Despite the announcement, the Hang Seng China Enterprises Index showed little reaction, ending the day down 2.1%. The CSI 300 Index has also experienced a 1.7% decline in April, with foreign funds selling mainland shares on a net basis for two consecutive weeks. This has contributed to the benchmark’s worst losing streak since March 2020.
Amid the market challenges, Wu Qing, the head of the China Securities Regulatory Commission, emphasized that the guideline aims to protect investors’ rights and ensure stability in the capital market. The recent setback in sentiment was further compounded by a slump in China’s exports in March, which exceeded expectations, dealing a blow to hopes of offsetting weak domestic demand.
Prior measures, including a crackdown on short selling, tighter IPO processes, and other risk control measures, have aided the onshore markets in their recovery. The latest statement from the State Council indicates that market regulation will continue to be a key focus for top policymakers, suggesting ongoing attention to market stability and risk management.
In summary, China’s commitment to tightening stock market supervision reflects a proactive approach to addressing market challenges and ensuring the stability and integrity of the capital market amid evolving economic conditions.
