Weak conditions delay reforms

By Zhang Yi  |   2008-10-31  |     NEWSPAPER EDITION

CHINESE financial regulators have delayed the launch of several market reforms due to a stock market slump, a global financial meltdown and an economic slowdown, sources said yesterday.

The stock regulator's target to unveil short selling and margin trading next month may not be met and it won't start trading of stock index futures within the year, according to people familiar with the matter.

The country has also temporarily shelved a plan to introduce a growth-enterprise board in Shenzhen and postponed a proposal to let Hong Kong-listed Chinese firms issue stock back on mainland bourses, the sources said.

"These reforms are definitely good for the market's long-term development," said a Shanghai-based source close to the securities watchdog. "But regulators believe rushing could lead to risks and worsen market volatility."

The China Securities Regulatory Commission said early this month that it was planning to allow selected brokers to start margin lending and short selling trading as part of its efforts to boost liquidity.

The initiatives are a sharp contrast to the actions of overseas stock markets in banning short sales. The CSRC had proposed to allow short selling in 2005 but moved slowly in pushing the plan.

Officials at the CSRC were not available to comment while the China Securities Journal yesterday quoted an unnamed securities official as saying that the preparation for short selling is still "under way." Short selling allows retail investors to sell borrowed stocks with an aim to buy them back later at lower prices to profit from the difference. Margin trading lets brokers fund stock purchases by individual investors.

The key Shanghai stock index has lost about two-thirds so far this year. Worries about a share supply glut, falling corporate profits and tumbling global stock markets dragged down the index.