China's capital-market foundation is still not
strong after recent reforms and the country will only unveil derivatives such as
stock-index futures when conditions mature, a top securities regulator said
today in a publicized speech.
The authority's comment came at a time when booming domestic bourses
benefited from huge capital inflows, which fueled regulatory concerns over
potential bubbles in the market.
"Recent positive shifts in the market are only preliminary," said Shang
Fulin, chairman of the China Securities Regulatory Commission in a speech posted in
major stock newspapers.
"Internal and external factors that could hinder the long-term healthy
development of the market have yet to change and the foundation for stable
growth is still not sound."
benchmark Shanghai Composite Index jumped 130 percent in 2006 and
extended its gains early this year partly due to a string of market revamps,
which have made all equities tradable and bolstered corporate governance.
The regulator started a campaign in May 2005 to convert non-tradable shares
at listed companies, which accounted for two-thirds of the total market value
and were mostly held by state institutions, into tradable entities.
As the majority of domestic public firms have wrapped up the share
conversions, Shang depicted the reform as a turning point for the market, but
indicated that the foundation is not solid enough for faster and larger
Case in point, the CSRC has postponed the launch of stock-index futures,
which had originally been scheduled to debut late last year, citing immature
market conditions and prolonged preparatory work.
Shang said in the speech that the stock regulator will introduce stock index
futures when "preparations are sufficient and conditions mature," without giving
a timetable. He had previously said the launch could come as early as this
Stock-index futures are derivatives that would let investors bet on an equity
barometer's drop to profit, a practice currently banned by the regulator on
worries over rampant speculation and greater market volatility.
Shang's speech was delivered over the weekend at the annual national
securities and futures conference in Beijing, a meeting designed to outline securities work
highlights for the year.
The chairman also vowed to encourage long-term investors to step into the
market while regulators will continue to beef up corporate governance and
improve information disclosures.
Authorities will urge listed firms to adopt new accounting rules, boost the
market's risk-management system and clamp down on profit falsifications, Shang
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