Alan Greenspan’s consistent injection of liquidity to rescue falling US stock markets when he was chairman of the US Federal Reserve came to be known as the “Greenspan put“.
Taking a leaf out of Greenspan’s book, the new head of China’s securities regulator appears to be offering the country’s stock markets a “Liu put”.
In his first briefing as chairman of the China Securities Regulatory Commission (CSRC), Liu Shiyu vowed to step in “decisively” if needed to curb panic in the stock markets and defended intervention by the authorities following last summer’s US$5 trillion selloff, Bloomberg reports.
It is far too early to think about China Securities Finance — the body that the government has used to prop up equities since then – leaving the market, Liu said during the weekend.
The fund now has stakes in almost 600 publicly traded companies, Bloomberg figures show.
A new registration-based system for initial public offerings, which will end CSRC intervention in pricing and expedite IPOs, is necessary but will take time, Liu said, without elaborating.
While a slow introduction of the process will limit the supply of new equities, it’s bad news for the more than 700 companies that have IPO applications pending with the regulator.
“Investor confidence has yet to recover from last year’s stock market rout,” China Asset Management Co., one of the country’s largest mutual fund companies, said in a statement.
It said Liu’s comments “will stabilize expectations and ease worries about financing pressure”.
Liu took over as head of the CSRC last month from Xiao Gang, who was widely criticized for his handling of last summer’s rout and oversaw the failed introduction of a market circuit-breaker mechanism in January.
There are “lessons to be learned” from the circuit-breaker fiasco, and the country won’t be ready for such a system for years, said Liu, who was previously chairman of Agricultural Bank of China Ltd.
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