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Experts call for substantial measures to stabilize market

By Ding Qi (chinadaily.com.cn)
Updated: 2008-08-04 18:29

Though Chinese securities regulators vowed to "go all out" to ensure the stability of the stock market during the Olympics, substantial policies are needed to salvage investors' confidence and support the healthy development of the market, according to securities experts.

The Securities Times on Monday quoted experts as saying that maintaining the stability of the domestic stock market is now at the top of the regulators' agenda. However, most of them believe the basis of market stability lies in a sound market operating system.

Although China's capital market has corrected some defects since the share-split reform, insider trading, price manipulating, account cheating and lack of a risk-proof system still occur repeatedly amid drastic fluctuations of the markets, according to Guo Tianyong, a professor at the Central University of Finance and Economics. "All these are results of insufficient regulatory construction."

Guo urged the securities regulators to work out a long-term development plan of the capital market and to improve construction of the fundamental system, in order to solve the market's structural problems.

Meanwhile, the regulators should fortify the law enforcement system in the securities markets and coordinate with justice departments to stop lawbreakers, Guo said.

Zhong Wei, director of Peking University's Financial Research Center, was also in favor of severe punishment of stock crimes, especially insider trading. The regulator should actively support civil compensation and collective lawsuits against illegal acts to better protect the interest of small investors, he said.

In addition, new financial tools, especially those with short trading mechanisms are also considered an effective way to stabilize the market.

Under a short trading mechanism, investors can profit from the drop of securities after creating a short position at higher prices.

Professor Guo urged that securities regulators launch securities credit trading and stock index futures, which can bet on either stock rise or fall. These tools can meet diversified risk preference and investment needs of traders and will help to form a complete market operating mechanism.

The launch of stock index futures may help to reactivate investors' enthusiasm in the current weak market, professor Han Xiuyun from Tsinghua University said.