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Markets caught in row
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Yang Yunfei
CHINA shares ended mixed yesterday after thin trading as most investors kept to the sidelines, waiting for more policy hints and an official announcement on the investigations of the country's stock market which, many scholars say, has become a “casino".
Brokers said that the crackdown on stock irregularities has kept market sentiment weak while investors called for better regulation and development for the market.
The China Securities Regulatory Commission (CSRC), China's securities watchdog, began probing alleged irregularities in shares of two Shenzhen-listed high-tech firms, China Venture Capital and Yorkpoint S&T, in the most public effort in recent years to clean up the stock market.
The investigation has spread to include securities firms, banks and other institutional investors who traded heavily in shares of the two targeted firms.
In January, Premier Zhu Rongji weighed in, vowing severe punishment for financial institutions which violate corporate laws.
Companies “that should be closed must be closed resolutely and those that should be delisted must be delisted, without any mercy", Zhu was quoted as saying in a call for stronger supervision of the financial sector.
Zhou Xiaochuan, chairman of CSRC, said at a national conference in January that irregularities in the stock market had greatly hurt investors' confidence. He vowed to step up efforts to crack down on fraud and price manipulation and eradicate the roots of corruption.
The probe, however, sent a shudder through the markets and triggered selling of high-priced stocks.
China shares ended down for a fourth day in a row last week as trading resumed after a two-week Lunar New Year holiday, transforming China's bull markets, which were the best-performing on earth last year, into one of the world's worst.
The crackdown on stock manipulation has also sparked heated debates on the state of China's 10-year-old stock market.
Wu Jinglian, a leading economist with the Development and Research Centre of the State Council, repeatedly blasted fraud, price manipulation and insider trading, which have long plagued the markets.
He highlighted the risks to investors in an interview on State television last month and compared the markets unfavourably to a casino.
Wu's remarks coincided with the official announcement of a crackdown on price rigging which sparked a panic sell-off among investors.
In comments delivered to a stock market symposium in Beijing on Sunday, five leading economists defended China's fledgling markets, acknowledging flaws but stressing their role as a critical lifeline for the national economy and the need for further development.
“We must recognize that the stock market has undergone rapid development over the past 10 years and still has a bright future," Xiao Zhuoji, a professor at Beijing University said.
While there were some flaws in the market, “the mainstream business within the brokerages and among the fund managers is positive," Xiao said.
Zhang Junkuo, director of the State Council Development Research Centre, yesterday urged all parties concerned to properly understand Professor Wu's comments which he said were not meant to deny the stock market's roles, adding the market does need to be further regulated and developed.
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