China calls for investors to assess epidemic 'rationally'

Beijing

CHINA'S top securities regulator said that investors should evaluate the impact of the deadly coronavirus objectively, following a slide in equities across the globe and a retreat in the yuan in offshore trading.

The China Securities Regulatory Commission (CSRC) said in a statement issued during the Chinese New Year holiday on Tuesday that securities firms should guide investors to assess the disease "rationally and objectively" and "adhere to the concept of long-term investment and value investment".

China's domestic markets remain shut for the break, and are scheduled to reopen on Monday. That session may prove volatile, coming after worries about the economic impact of the spreading virus saw contracts tied to Chinese stocks tumble in recent days. FTSE China A50 futures have slumped almost 6 per cent since the close on Thursday, when trading on the mainland last occurred.

The outbreak has wrecked what would otherwise be a strong period for retail sales, with hundreds of millions of Chinese travelling and spending during the new year celebrations. The disease also emerged just as China's economy was picking up steam, with the securing of a phase-one trade deal with the US and signs of an upturn in manufacturing.

The CSRC called for companies to make dealing with the virus their top priority, and to "implement detailed prevention and control measures".

At the same time, the regulator ordered contingency planning to ensure the "safe and stable operation of the transaction-settlement system". Brokerages should provide support for off-site trading amid the focus on preventing the spread of the disease, the CSRC said.

Reopening China's markets could prove challenging as individuals and employers alike grapple with how to get back to business while at the same time strengthening health-safety standards. The CSRC also urged companies to be forthright in their disclosures and told stock exchanges to ensure that investor rights are protected.

"All listed companies are to disclose information in a true, accurate, complete and timely manner," the regulator said.

China's domestic stock market, the world's second largest, is famous for being dominated by retail traders, who can sometimes engage in crowd behaviour. News of the government's latest initiatives - a new subsidy or regulation - can send stocks soaring as individual investors rush to pile in. And official calls for calm aren't unusual.

In 2018, the CSRC urged local authorities to help ease pressure on listed companies threatened by sales of shares that had been pledged as collateral for loans. Back in 2015, China took even sterner measures, suspending a swathe of shares during an epic bursting of a domestic stock bubble. It also deployed the "national team", as state-backed funds are called, to prop up shares.

Policymakers have at the same time tried to nurture a long-term investment culture. China is allowing full foreign ownership of life insurers, futures, securities and mutual fund companies in stages this year.

Foreign investors have also been an increasing presence in the onshore market. Overseas capital now accounts for 10 per cent of daily equity trading in Shanghai, up from 2 per cent just 12 months back, Zhu Min, a former central bank official who is now chairman of the National Institute of Financial Research at Tsinghua University, said earlier this month.

That all raises the stakes for how regulators handle the domestic markets as they reopen next week. BLOOMBERG

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