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Australia may be called on to help clean up China's stock market
NaN of
[img=620x0]http://www.afr.com/content/dam/images/g/k/j/3/a/p/image.related.afrArticleLead.620x350.gkj3af.png/1445930134936.jpg[/img]Fang Xinghai's appointment is a positive development for China's reform agenda. Bloomberg
[Image: 1426320227568.png]
by Lisa Murray
Fang Xinghai once joked during a speech that being head of China's stock market regulator was the most difficult finance sector job in the country.
Four years later, the reform-minded official with a doctorate from Stanford University and a special interest in Australia, is about to take on a senior job at the very same institution – deputy chairman of the China Securities Regulatory Commission (CSRC).
It's a big job. The government's botched stock market rescue earlier this year is widely believed to have set the Chinese securities industry back years, just as it was starting to peak the interest of international investors.
A new trading link with Hong Kong and improvements in regulation raised hopes that China's stock market, long dismissed as little more than a casino, was showing signs of becoming a functioning, more professional market.
But after a year long rally, the market lost almost a third of its value in just four weeks, prompting the government's drastic response in July.
Central bank funds were pumped into the market, shares suspended, IPOs halted, shorting of stocks banned and at least one financial journalist locked up.
Given the run-up in the stock market had been partly fuelled by enthusiastic editorials in the Communist Party newspaper, the heavy-handed reaction smacked of panic and called into question the credibility of policymakers.
At the centre of the response was the CSRC and that's why Fang's appointment is a positive development for China's reform agenda.
He has both international and securities experience, having worked as an economist and investment official at the World Bank in Washington before coming back to China to help guide the China Construction Bank's Hong Kong listing and then heading up the Shanghai city government's financial affairs office.
He is also plugged in, with a high-level position on the government's key economic advisory group, which reports directly to Premier Li Keqiang, as well as close connections to central bank governor Zhou Xiaochuan.
Most importantly, Fang is a good communicator. Prior to his current Beijing role, he was regularly quoted in both domestic and overseas newspapers, spoke at conferences in China and abroad and briefed foreign companies on the progress of economic and financial reforms.
While he rarely comments publicly since being promoted to Beijing's inner circle, he still plays an intermediary role. He was the Chinese official chosen to explain the Party's reform agenda at the Boao Forum, albeit in a session that was closed to the media.
This type of engagement is important for China as it looks to open up its financial markets.
Communication has been lacking in recent policy making decisions, including the stock market intervention and the surprise move in August to devalue the yuan. Both prompted wild gyrations on global markets as investors scrambled to interpret the moves in the absence of a clear and timely explanation.
Fang's appointment is also interesting for Australia as he has previously suggested there should be more engagement between the two countries' financial regulators.
He once told this newspaper ahead of a visit to Australia that Canberra "lacked ambition" in its relationship with Beijing.
"Australia should have a bigger ambition and a bigger influence on ideas and institutions rather than just influencing the region through trade," he said.
News of Fang's appointment to the CSRC was followed by another important development for reform watchers, as the People's Bank of China announced on Friday it had removed the ceiling for deposit rates.
While this is unlikely to unleash a deposit war among banks, it means that China's interest rate regime is now fully liberalised and it happened earlier than anticipated.
The removal of interest rate controls, in turn, paves the way for the yuan to become a global reserve currency. The International Monetary Fund is expected to announce next month the yuan will be added to its basket of reserve currencies, known as Special Drawing Rights.
Over the long term, that's a game changer as it means sovereign wealth funds and asset managers around the world will increasingly want to hold yuan-denominated assets.
A functioning stock market, helped along by the likes of Fang, will give them some more investment options.
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04-11-2015, 08:41 PM
(This post was last modified: 04-11-2015, 09:20 PM by CityFarmer.)
http://www.bloomberg.com/news/articles/2...u-comments
PBOC Inadvertently Boosts Stocks With Dated Zhou Comments
Kana Nishizawa
Adam Haigh adhaigh
November 4, 2015 — 12:59 PM SGTUpdated on November 4, 2015 — 4:51 PM SGT
- 2015 target for Shenzhen-Hong Kong link surprises investors
- HKEx shares pare gain after PBOC issues clarification
China’s central bank unintentionally sparked a surge in the nation’s stock market by publishing five-month-old comments from governor Zhou Xiaochuan that said a link between exchanges in Shenzhen and Hong Kong would start in 2015.
Zhou’s comments appeared in a lengthy article dated Tuesday that focused on the need for Communist Party discipline. It was published on the PBOC’s website without any indication that the statements were old. The central bank later said via text message that the comments were taken from a speech on May 27, while Hong Kong’s bourse said the link is still subject to regulatory approval. The clarifications came after a 3.3 percent surge in the Shenzhen Composite Index and a 3.1 percent gain in Hong Kong’s Hang Seng Index in early trading.
The PBOC article moved markets because it came as a surprise to many investors who had anticipated the link would be delayed after a $5 trillion rout in Chinese shares. Ten of the 13 respondents in a Bloomberg survey in September predicted the Shenzhen connect would start next year as authorities focused their efforts on stabilizing mainland equity prices.
Few Details
“It seems there is no unified channel to talk about this, and every time an individual authority talks about it the market has the chance to drum up or down,” said Castor Pang, head of research at Core-Pacific Yamaichi Hong Kong.
Policy makers have given few details about the timing of the program since China’s stock-market selloff started in June. The link may begin in the second half of the year, Hong Kong Chief Executive Leung Chun-ying said May 28. The city’s exchange operator had also outlined a similar timeframe, while a person familiar with the matter said in May that China’s State Council had signed off on the plan.
[Image: 488x-1.jpg]
Officials have been reviewing plans to expand the exchange link to Shenzhen after starting the Stock Connect program between Shanghai and Hong Kong in November 2014. MSCI Inc. has said that giving foreigners more access to China’s second-largest equity market, home to many of its small technology companies, is key to getting the nation’s stocks included in global benchmark indexes.
Expanding the exchange connect would be part of China’s effort to link its financial markets with the rest of the world and boosting global usage of the yuan. The Communist Party’s next five-year plan calls for increasing the yuan’s convertibility by 2020 as authorities push for inclusion in the International Monetary Fund’s basket of reserve currencies.
New Channel
“As we accelerate the nation’s opening of trade and investments, we need to speed up the opening of the financial sector," Zhou wrote in the article. “This year the Shenzhen-Hong Kong connect will be launched; this will show a new channel between China’s capital markets and the world has opened."
The Shenzhen index held on to its gains after the PBOC clarification, rising 5.1 percent at the close. Along with speculation over the timing of the link, traders pegged the gains to optimism over China’s five-year plan to bolster the economy and use of the currency. Shares of Hong Kong Exchanges & Clearing Ltd., which had surged as much as 9.1 percent, ended the day with a 4.7 percent gain.
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Time heals all wound in the wrong term
China enters bull market after months of share volatility
- CHAO DENG
- THE WALL STREET JOURNAL
- NOVEMBER 06, 2015 8:05AM
[Image: 281858-2b4683d8-8403-11e5-9851-7bf406229885.jpg]
Investor watch stock information at a Chinese brokerage house. Source: Reuters
[b]China has entered a bull market, a surprising milestone after months of volatility wiped out trillions in value from mainland equities and rattled global markets.[/b]
The Shanghai Composite Index has gained 20.3 per cent since August 26, the bottom of the summer sell-off. A bull market is defined as a rise of 20 per cent from a recent low. The benchmark finished up 1.8 per cent at 3522.8 yesterday.
The Shenzhen Composite Index, a benchmark of the mainland’s smaller stock market, has rallied 32 per cent from its bottom on September 15. It closed up 0.2 per cent at 2093.47. The ChiNext Price Index, a gauge of China’s volatile start-up shares, has rallied 43 per cent from its bottom on September 15. It finished down 0.8 per cent at 2564.72.
Investors gradually have returned to the market after a summer of panicked selling, which Beijing scrambled to stem. Trading volumes reached their highest level since mid-August yesterday and investors are borrowing to buy stocks again. Margin loans are at their highest level in roughly two months, after dropping sharply in the throes of the rout, when investors rushed to sell holdings to repay money borrowed from brokerages.
This year, Chinese officials dug deep into their playbook for ways to stabilise the market, from pumping money into state-backed funds that bought blue chips to cracking down on short sellers and suspending initial public offerings. They even pledged to keep buying until the Shanghai Composite Index reached 4500 — a goal still roughly 1000 points away.
Stocks rallied last month in anticipation that officials would announce easing measures after China reported its growth slowed to 6.9 per cent in the third quarter, clouding its ability to reach a year-end target of about 7 per cent. China has cut interest rates and the amount of reserves banks are required to hold three times since the start of the sell-off, with the latest round of cuts in late October.
Despite the gains, some investors are sceptical that the wounds from the summer have healed.
“Lots of investors have been deeply hurt by the disastrous fall in summer, besides the regulator has basically barred investors from using leverage or hedging tools,” said Gu Yuan, a retail investor from Shanghai who bought two stocks on the ChiNext board and have enjoyed 20 per cent gains since September.
The tentative success nevertheless has drawn investors eager to jump into a rally that the government helped create, said Steve Wang, research director at brokerage Reorient Group.
“There is a feeling that people don’t want to miss out on buying at the bottom.”
Analysts estimate the Chinese government has spent hundreds of billions of yuan buying stocks to stabilise the market, although officials haven’t disclosed the exact amount since they announced their massive intervention efforts in early July. The consensus is that authorities have held on to stocks that they have bought into since the summer, if not adding more to their portfolio.
China Securities Finance Corp and Central Huijin Investment — the so-called National Team, a group of state-backed companies and stockbrokers tasked to prop up the market — has bought in shares of 49 per cent of listed firms in total on the A-share market, with more than 1.3 trillion yuan ($US205 billion) of market capitalisation, according to Wind Information Co.
A sharp two-day rally gave the index a push, rallying a total of 6 per cent. Stocks jumped 4 per cent on Wednesday when mainland shares had rallied on speculation, fuelled by out-of-date comments by the central bank, that Chinese authorities would roll out a new trading link to further open up their market to foreign investors.
In Shanghai, shares of brokerages outperformed on expectations that a rebounding market would translate into higher trading volumes. Industrial Securities Co., Everbright Securities Co. and Huatai Securities Co. all hit their 10 per cent maximum daily limit set by regulators.
Among 24 listed brokers, 22 received injection of funds from either China Securities Finance Corp or Central Huijin Investment, according to their third quarter reports.
Gao Fei, a Beijing-based investor said he is bullish on the sector’s gains, which represents the government’s commitment to attract retail investors.
“If the national team only props up the index for two days, average investors may not follow suit,” he said. “I bet the rally will go on tomorrow.”
China’s market began to stabilise in September, when the unwinding of margin debt began to taper off. Loans hit a recent low of 906.7 billion yuan on September 30.
The market picked up in October as investors tipped toed back into the market, pushing margin loans up again. Shanghai’s 10 per cent gain in October marked the index’s best month since April.
Margin loans totalled 1.05 trillion yuan on Wednesday, still down roughly 54 per cent from a June 18 peak of 2.27 trillion yuan, according to Wind Info.
Daily trading volume jumped to 1.37 trillion yuan yesterday, compared with a daily average of 883.4 billion in October. Thursday’s volume was up nearly four times from a recent low of 370.6 billion on September 30 but still down about 40 per cent from a record 2.4 trillion yuan on May 28.
Wall Street Journal
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China doubles margin requirement for equities in bid to check volatility
NaN of
[img=620x0]http://www.afr.com/content/dam/images/g/j/q/s/v/s/image.related.afrArticleLead.620x350.gkyvch.png/1447448438663.jpg[/img]The margin reset is likely to weigh on investor sentiment when mainland markets re-open on Monday. Getty Images
by Bloomberg News
China moved to contain leveraged wagers on its stock market, cutting by half the amount of borrowed money investors can use to buy shares, as authorities seek to prevent a repeat of the excesses that led to a $US5 trillion rout earlier this year.
Margin requirements will be raised to 100 per cent from 50 per cent starting on November 23, the Shanghai and Shenzhen bourses said in separate statements after local exchanges closed on Friday. The rule change means that an investor with 1 million yuan ($US156,895) in their account is limited to borrowing another 1 million yuan from a broker to buy more shares. Previously, they could borrow as much as 2 million yuan.
"I think ultimately it's a very good thing in the long-run," Brendan Ahern, managing director at Krane Fund Advisors LLC in New York said by phone on Friday. It will "certainly will help de-risk, or take down, some of the inherent volatility in the market".
While the move is likely to weigh on investor sentiment when mainland markets re-open on Monday, the Shanghai bourse said it will help prevent systemic risks from building in China's financial system. Surging margin debt helped amplify the record-breaking boom - and subsequent bust - in Chinese stocks earlier this year as ready access to leverage gave the country's millions of individual investors increased buying power.
[img=620x0]http://www.afr.com/content/dam/images/g/k/y/v/r/3/image.imgtype.afrArticleInline.620x0.png/1447448435555.jpg[/img]The Shanghai Composite tumbled 43 per cent from its June 12 high through August 26.
Margin financing, which shrank by more than half during the rout, has been rising for six straight weeks as the Shanghai Composite Index bounced back into a bull market. The decision to tighten investor access to the loans comes a week after regulators lifted a freeze on initial public offerings, removing one of the key measures of support for equities.
"That wasn't expected by the market, so investors will probably react negatively," said Wu Kan, a Shanghai-based fund manager at JK Life Insurance Co. "The regulators want margin trading to increase in an orderly manner. Brokerages will probably bear the brunt."
A Bloomberg index of American depositary receipts on Chinese stocks including Alibaba Group Holding declined 2.2 per cent as of 1.33pm on Friday in New York. The Deutsche X-trackers Harvest CSI 300 China A-Shares ETF, the biggest US exchange-traded fund investing in mainland shares, lost 2.8 per cent to $US36.37. The Market Vectors ChinaAMC A-Share ETF fell 2.4 per cent to $US46.35. Mainland stock-index futures dropped 2.2 per cent.
On Friday, Chinese stocks fell the most in six weeks in Hong Kong trading after commodity prices plunged and the nation's broadest measure of new credit slumped. Hong Kong's Hang Seng China Enterprises Index slid 2.2 per cent to 10,181.47 at the close, dragged down by oil companies and banks. China Construction Bank, the nation's second-biggest lender, and PetroChina, the largest energy producer, retreated at least 2.9 per cent. The Shanghai Composite Index dropped 1.4 per cent to 3580.84.
Margin debt and volume rose "rapidly" in recent weeks as some investors bought shares trading at high valuations, the Shanghai exchange said in a post on its Weibo account explaining the rule change. The move will help reduce leverage and ensure "healthy development" of the market, it said.
Officials face an balancing act: if they crimp margin financing too soon, it could derail the bull market and reduce household wealth in an economy increasingly reliant on consumer spending. If they wait too long, the build up of debt could threaten stability in the financial system and magnify the next market downturn.
The Shanghai Composite tumbled 43 per cent from its June 12 high through August 26 as investors cut leveraged bets by more than $US200 billion. The rout was only halted after the government took unprecedented steps to prop up share prices, including banning major shareholders from offloading shares, ordering state funds to buy stocks and restricting short selling.
While a gauge of 60-day price swings on the equity gauge has dropped from an 18-year high in September, volatility is still the most extreme among global benchmark indexes tracked by Bloomberg.
"Increasing margin requirements is a prudent decision," said Gerry Alfonso, a sales trader at Shenwan Hongyuan Group Co in Shanghai. "While in the short term this decision could impact the equity market, in the mid to long run it would help decrease volatility."
Bloomberg
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Chinese brokerage shares dive as Hong Kong chairman goes missing- AFP
- NOVEMBER 23, 2015 3:54PM
Guotai Junan International said it had been “unable to reach” its Hong Kong chief Yim Fung.
[*]
Shares in Guotai Junan International dived after the major Chinese brokerage said it could not find its Hong Kong chief, at a time when Beijing is targeting the financial sector in an anti-graft campaign.
Shares in the Hong Kong-listed firm, a subsidiary of Guotai Junan Securities, dropped more than 15 per cent at one point after the company said it had not been able to locate its chairman Yim Fung since Wednesday.
“The company has been unable to reach Dr Yim Fung, chairman of the board ... since 18 November 2015,” the company said in a statement filed to the stock exchange.
“Dr Yim currently cannot discharge his duties,” it said, adding that the firm has appointed executive director Qi Haiying as temporary chairman.
Shares in Guotai Junan International stood at HK$2.91 (US38c), down 10.46 per cent, by the break.
Dr Yim is also a board member of local trade group Chinese Securities Association of Hong Kong.
The circumstances of his disappearance are unclear, but it comes as China targets the financial sector as part of a sweeping anti-graft campaign after a stock market rout that rocked global markets over the summer.
Chinese authorities have been pursuing a hard-hitting campaign against crooked officials since President Xi Jinping took office in 2013, a crusade that some experts have called a political purge.
State media reported earlier this month that Yao Gang, the deputy chief of China’s top securities regulator, is under investigation for committing “severe disciplinary violations” -- normally a euphemism for graft.
Mr Yao, vice chairman of the China Securities Regulatory Commission (CSRC), was the general manager of Guotai Junan Securities from 1999 to 2002, according to Bloomberg News.
In October, China’s anti-corruption watchdog said it would expand its inspections to major financial institutions, which are already under pressure after a spectacular stock market meltdown.
After soaring 150 per cent in one year, Shanghai stocks went into a tailspin in June, tumbling nearly 40 per cent in a few weeks despite massive intervention by the authorities.
The frantic and clumsy state efforts to stop the bleeding were criticised, with a number of experts questioning the apparent contradiction with Beijing’s intention to give a greater role to the market and private sector.
The CSRC played a lead role in the response to the crisis, including launching probes into “malicious short-selling”, which the government said was partly to blame for the chaos, and putting a temporary stop on initial public offerings.
AFP
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This could be the last decent shot at making 680% on China IPOs
SHANGHAI (Nov 23): What once looked like long odds of securing shares in Chinese initial public offerings now look too good to pass up.
The final 28 IPOs under China’s existing online lottery system will start taking orders as soon as this month. While chances of getting an allocation have never been stellar at about 0.6%, a requirement for prospective investors to pre-fund their bids kept a cap on competition. After this batch of deals is completed, authorities will scrap the upfront payment rule, prompting a surge in investor participation that China International Capital Corp. says will slash the odds of a winning bid to about 0.01%.
Getting out in front of that flood of new orders is one reason why Pan Weiting, a 31-year-old accountant in Shanghai, is stockpiling as much as 400,000 yuan ($88,300) to bid on the final batch of 28. “I sold some shares to get ready,” Pan said. “IPOs are still the best bet, guaranteeing you pretty high returns.”
http://www.theedgemarkets.com/sg/article...china-ipos
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(30-10-2015, 08:18 PM)greengiraffe Wrote:
As China's sharemarket crashed, these hedge funds returned 70pc
NaN of
[img=620x0]http://www.afr.com/content/dam/images/g/j/t/l/m/m/image.related.afrArticleLead.620x350.gkmm27.png/1446162939572.jpg[/img]Traders chat at their work stations at the Shanghai Stock Exchange. Bloomberg
by Zhang Dingmin
China's summer market selloff wasn't a total rout if you were one of the country's top-performing hedge funds that gained an average 70 per cent as almost 1,300 other funds were wiped out.
The country's top 10 performers, run by Ze Quan Investment, Sunrise Investment, Zexi Investment and Yingyang Asset Management, found gains in the June-August period by heeding a famous maxim: Markets are ruled by fear and greed.
"I was scared," said Jiao Ji, chairman of Sunrise, based in northeastern China's Jilin province, who dumped all his stock holdings in May, sat out the post-June 12 crash, and then made strategic purchases on brief upswings prompted by government intervention in July. Chasing gains at the top of the market was like "sucking blood from the tip of the knife," he said.
Four of Sunrise's funds made the top-10 list of the 2,193 stock funds in China in the three months through August, according to Shenzhen Rongzhi Investment Consultant, which tracks hedge funds. All 10 funds had sold their holdings or stayed out of the market before the June selloff.
Chinese funds have few sustainable strategies to avoid large declines. They mostly only buy and sell shares, rather than engage in tactics such as short-selling and trading in stock-index futures, which Chinese authorities have clamped down on after the market crash. While private investment firms are broadly categorised as hedge funds in China, they differ from their global counterparts in not making extensive use of hedging strategies. That makes it harder to produce consistent returns.
"Pure market timing is very difficult, if not impossible, from a statistical point of view," Hong Yan, Shanghai-based director of China Hedge Fund Research Centre, said by phone. Timing it right becomes crucial because "there are no other tools" for hedging, such as derivatives, he said.
.............
‘China’s Carl Icahn’ Jailed for 5 1/2 Years for Tinkering Stock Prices
China sentenced a former billionaire hedge fund manager to five and a half years in prison for stock-price manipulation, in one of the country’s most high-profile cases following the 2015 market rout.
Xu Xiang, founder of Shanghai-based asset management firm Zexi Investment, and two associates were convicted of driving up share prices, the Qingdao Intermediate People's Court in Shandong province said on Monday. Xu was also fined 11 billion yuan ($1.6 billion), sources who attended the court hearing said. It is the highest-ever fine for an individual committing a financial crime in China.
http://www.caixinglobal.com/2017-01-23/101048247.html
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(08-04-2015, 09:41 AM)BlueKelah Wrote: Bloomberg - U.S. Dot-Com Bubble Was Nothing Compared to Today’s China Prices http://bloom.bg/1CRmFSh
sent from my Galaxy Tab S
On hindsight, a bubble takes some time to brew, blow up and then suddenly burst.
And when it bursts, the first ones to get hurt, would have to be foreigners I suppose?
So in future, credit rating firms need to incorporate "willingness" to pay into the consideration? So, how do you quantify that? 
Hedge funds cry foul over China education firm’s default
A group of bondholders, which includes some of Asia’s most prominent hedge funds, have alleged in public statements that the company chose not to pay its offshore debt even though its business is healthy and growing.
He said the incident shows that a company’s liquidity and ability to repay its debt aren’t the only factors that investors should consider when assessing default risk. “Equally vital are investor confidence and a firm’s willingness to fulfill its financial obligations,” said Lee, who isn’t involved in the XJ case.
https://www.businesstimes.com.sg/interna...-s-default
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