Securities watchdog to realize market reforms

An investor walks past an electronic board showing stock information at a brokerage house, Dec 25, 2018. [Photo/IC]

China's securities regulator will put into place more market-based reform measures to support the medium and long-term growth of the equities market, including the launch of a science and innovation board in Shanghai as soon as possible.

"To boost innovation and high-quality growth, we will promote the reform of fundamental rules (on the new board) in a coordinated way," the China Securities Regulatory Commission announced.

Areas where the commission will push forward reforms on the new trading platform include stock issuances and trading, listing and delisting, information disclosure and investor eligibility.

The announcement was released on late Monday after a meeting mapping out the commission's work in 2019.

The CSRC also pledged to deepen reforms of existing trading platforms providing financing for innovative firms and to small enterprises－the ChiNext board and the National Equities Exchange and Quotations system－as part of overall efforts to expand direct financing channels for enterprises through a multitier market system.

Xue Yi, associate professor of finance at the University of International Business and Economics, said such a system is critical for properly allocating resources and serving the real economy.

"With effective rules, it is possible for the science and innovation board to nurture enterprises grasping core technologies－a major source of new growth momentum," Xue said.

Speaking of the recent downtrend of China's A-share market, Xue said uncertainty in economic and financial policies has raised investors' aversion to risky assets such as stocks.

Chinese stocks closed lower on Tuesday, with the benchmark Shanghai Composite Index down 0.88 percent at 2,504.82. The smaller Shenzhen Component Index closed 0.81 percent lower at 7,332.35.

"Considering economic fundamentals and the market's low valuations, the Chinese stock market has become a good choice for long-term investments. With the unveiling of major reform policies, including detailed rules of the science and innovation board, market sentiment will increase gradually," Xue said.

Slumps on overseas bourses also weighed on Chinese stocks on Tuesday. But market observers said the influence of overseas markets, especially Wall Street, has weakened recently.

The Shanghai Composite Index dropped 2.99 percent to 2,516.25 last week, while the US market registered its worst week in more than seven years, with three major indexes down by around 7 percent to 8 percent.

"A-share investors are becoming more accustomed to volatility in the US market," said Hong Rong, founder of investor education platform Hongda Education.

"It is good timing for capital market reforms to be accelerated to help solve fundamental problems hindering healthy market development, given the current low valuations," he added.

Other capital market reform measures to be rolled out next year include optimizing rules for refinancing and trading supervision, the CSRC said. Capital market opening-up will also deepen next year, it said, with broader access for foreign investors to futures.

The commission's plan is in line with objectives raised by the tone-setting Central Economic Work Conference which concluded on Friday. It stressed the importance of capital market reforms and called for accelerating the launch of the science and technology innovation board.