(Reuters) – China's removal of its securities supervisory board chairman on Wednesday drew quiet cheers from markets, with investors pleading for bigger steps to tackle the roots of the recession plaguing the world's second-largest economy. I was looking for it and waiting for it.
Wu Qing, who headed the Shanghai Stock Exchange and served as a key deputy in the Shanghai municipal government, has been appointed as chairman of the China Securities Regulatory Commission (CSRC), replacing Yi Huiman.
The reason for Yi's dismissal was not disclosed, but his resignation comes as China's stock market hit a five-year low on Monday, sending investors scrambling to cut their losses. Analysts and investors said the departure was a sign that policymakers are ramping up efforts to rebuild China's battered market.
So far, market-focused support measures such as limits on short selling and lower transaction costs, as well as government statements pledging support, have helped stabilize but have failed to reverse the decline.
The benchmark Shanghai Composite Index rose from a five-year low on Monday, rising 1.4% on Wednesday, while the blue-chip CSI 300 index rose 1%.
These indexes have fallen about 5% and 2.6%, respectively, this year, but have fallen more than 13% and 15% over the past six months. In contrast, global stock markets generally rose.
real estate crisis
The Chinese market has been in near-constant turmoil since 2019, with debt-laden developer China Evergrande as a real estate crisis weighs on consumer sentiment and hampers recovery from the COVID-19 pandemic. This was highlighted by the recent liquidation of
“There's more going on here than just a post-speculative event, and stopping this may require real policy,” said George Magnus, a researcher at Oxford University's China Center. “It's certainly possible that the market will recover, but it's highly questionable whether it will be sustainable.”
Analysts say it is not the first time China has fired a CSRC chairman during a market rout, and see Wednesday's move as part of an effort to stabilize market sentiment.
“The China Securities Regulatory Commission is already working to shore up the market by curbing short selling, but this change at the top could be a sign that more is expected,” said Lindsey James, investment strategist at Quilter. ” he said. Investor in London.
Investors pointed to Wu's background as a securities regulator (previous CSRC chairs were mostly bankers), but said more needs to be done to allay market concerns. he emphasized.
There's a long way to go
Last week, the International Monetary Fund revised its forecast for China's growth rate upward by 0.4 percentage point to 4.6% in 2024 on the back of increased government spending, but it is still slower than last year's 5.2% growth.
The report said China could recover faster than expected if the government makes additional reforms to the real estate sector, such as restructuring bankrupt property developers, or spends more than expected to boost consumer confidence. He said there is.
Jeffrey Yu, a BNY melon advanced EMEA market strategist, stated that he would like to consider not only financial policies but also structural policies, especially household budget, and at the National People's National Congress in March (Chinese Annual Council). He said it may be announced.
“We emphasize that support for households is essential to boost sentiment and this requires widespread commitment from different tiers of government.”
But with such a large decline in Chinese assets, some investors say the country's economic trajectory was better than current market valuations suggest.
BofA's Friday report, citing data from EPFR, said government efforts helped stabilize sentiment, following last week's nearly $12 billion in inflows, the largest since 2015, through Jan. 31. In the past week, China announced $6.3 billion in inflows into stocks.
But there's a long way to go to get the money back, given that more than $80 billion was drained from Chinese portfolios last year, according to estimates by the Institute of International Finance.
“By any measure, sentiment towards China is incredibly bearish right now,” Ian Cunningham, head of multi-asset growth at asset manager NinetyOne, said in a note Wednesday.
“While we have seen strong performance and growth in recent years, we continue to see opportunities in businesses with structural tailwinds that trade at sale prices.The long-term outlook is better than current concerns suggest. It’s calm.”
(Reporting by Global Financial Markets Team and Shanghai Newsroom; Writing by Jörg Baselli; Editing by Darla Ranasinghe and Alex Richardson)
