- We ascribe the stock market's recent volatility to aggressive purchasing by a new breed of insurance company and the attempts by regulators to bring them under control.
- The China Securities Regulatory Commission (CSRC) weighed in at the weekend with a very public, and harshly worded, criticism from its chairman of these companies' behaviour. Aggressive purchases of listed firms, particularly state-owned enterprises (SOEs), have clearly touched a nerve.
- This again underlines the need for a regulator capable of better coordinating flows within the financial system, though there is no clear sign of this happening. Until tougher action is taken, expect regulatory moves to continue to have significant unintended consequences.
The chairman of the CSRC has launched a very public attack on aggressive stock purchases on the secondary market in recent months. Liu Shiyu, a former central bank deputy head, has accused this new breed of Chinese corporate raider of using illegal funds and morphing from "strangers at the gate to barbarians, and finally to industry thieves".
This is strongly worded stuff, triggering a 1.21 per cent fall in the Shanghai Composite Index on Dec. 5, and a 1.18 per cent drop in Shenzhen on the opening day of a mutual market access programme between Hong Kong and the southern city.
