Hong Kong’s stock exchange chief expects China to take some steps to regulate over-the-counter funding systems in the mainland following the recent troubles in the nation’s stock markets.
Charles Li, chief executive of Hong Kong Exchanges and Clearing Ltd. (00388.HK), said Chinese regulators could initiate some action given the view that the A-share rout in the past month may have been partly due to systems that facilitated large scale off-balance sheet funding activities.
The leverage ratios of many of the OTC funding players exceed normal risk control level, calling for some regulatory action, Li said, according to the Hong Kong Economic Journal.
The individual-oriented market is far too easy to cause a herd effect, Li added.
While authorities may not ban OTC funding, they are however likely to ensure more oversight, he said.
In other comments, Li said he doesn’t expect the stock market crash to have any material impact on China’s efforts to liberalize its financial markets and internationalize the renminbi.
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