INSUBCONTINENT EXCLUSIVE:
SHANGHAI: China's regulators lined up to rally market confidence on Friday with new rules, measures and words of comfort as shares brushed
near four-year lows for the second straight day before surging.
Vice Premier Liu He, who oversees the economy and the financial sector,
supplemented regulators' moves by saying the recent stock market slump "provides good investment opportunity" and that economic problems
should be treated rationally.
Liu also told Xinhua News Agency that while trade friction between the United States and China had an impact
on markets, "to be frank, the psychological impact is bigger than the actual impact".
Earlier in the day, the securities regulator, central
bank and banking and insurance regulator all pledged steps to bolster market sentiment as China reported its weakest pace of economic growth
since the global financial crisis for the third quarter.
While authorities in the world's second biggest economy have been slowly easing
monetary conditions, Friday's announcements were largely aimed at putting a floor under the tumbling stock market.
Beyond putting a floor,
the moves fuelled a rally
The Shanghai index jumped 2.6 percent.
Even with that, the Shanghai index is still down close to 10 percent this month and nearly 25 percent
since late January as foreign investors and domestic institutions dumped shares amid concerns about rising United States Treasury yields
and a trade war with the United States.
More recently, worries over the prospect of forced margin calls on the massive amounts of shares
pledged as collateral also weighed on markets.
WEALTH MANAGEMENT RULESOn Friday, China's banking and insurance regulator said it plans to
allow the wealth management subsidiaries of banks to invest product funds directly into stocks, a departure from the crackdown on such
products earlier in the year.
The draft rules, still subject to change, also scrapped the minimum investment requirement for investors in
such products, a further signal that policymakers are trying to free up funds for stocks.
Meanwhile, Liu Shiyu, chairman of the China
Securities Regulatory Commission (CSRC), said the regulator would encourage private equity funds to buy shares in listed firms, support
share buy-backs and speed up approval for mergers and acquisitions (MAs), according to a statement on the CSRC's official website.
Liu
also announced measures to aid private-run businesses, saying the regulator would support the issuance of high-yield bonds and other debt
instruments by small and medium-sized companies.
He said that regulators encourage various types of investorsto help ease liquidity
difficulties at listed companies with pledged shares.
The country's central bank chief weighed in on Friday, saying the People's Bank of
China (PBOC) is studying targeted measures to allay the financing difficulties of private companies and will push forward plans to support
such firms' bonds financing.
"The plunge protection team will be stepping up their efforts to lift the stock-market," said Sue Trinh, head
of Asia FX strategy at the Royal Bank of Canada Hong Kong Branch in a Friday note.
The policy push comes as growth of outstanding total
social financing, a reliable gauge of overall credit conditions, slowed to 10.6 percent in September from 10.8 percent in August
That was the weakest since 2005, according to Capital Economics.
The cooling comes even as Beijing adopted a range of measures to loosen
The PBOC has cut reserve requirements for lenders four times this year, with the latest cut effictive Oct
15.
China's economic growth cooled to its weakest pace since the global financial crisis in the third quarter as the trade war with the
United States began to bite.
"People are not that concerned about the GDP figure, it is only a little weaker than expected
They care more about the pledged shares, and the fact that regulators have stepped in [to avoid creditors forcing margin calls]," said Li
Zheming, analyst at Datong Securities, explaining the reason for the lift in stock prices on Friday.
