The mainland securities regulator's "rescue measure" announced on Sunday can't cure the core problem of the stock market there, according to Cheng Siwei, former vice-chairman of the Standing Committee of the National People's Congress.

Saying the policy "addresses symptoms but not root causes", Cheng conceded yesterday that it may bolster investor confidence in the short run.

The mainland regulator ordered shareholders to sell stocks on the block trading system if they expect to sell a large amount of shares freed from the lock-in period.

Putting restrictions on large share sales, the policy is widely regarded by analysts as a rescue measure aimed at boosting the stock market after it witnessed its worst week in 11 years.

Cheng said further rescue measures may include reducing stamp duties.

But, "the real solution is to improve the quality of the listing companies", Cheng said, stressing that he is speaking in the capacity of a scholar.

Shanghai shares climbed as much as 6.68 percent yesterday morning, but they gave up most gains to close up 22.31 points, or 0.72 percent, at 3,116.98.

Although the benchmark Shanghai Composite Index has plunged nearly 50 percent from its all-time high last October, Cheng said the market hasn't entered into a bearish period. Instead, he said the mainland market is in a "slow bull" state.

He urged investors to hold a long-term view, saying they don't need to panic as long as they hold quality shares.

Decoupling story

Under the trend of globalization, Cheng said that the mainland economy couldn't decouple amid the US credit crunch, but he remained positive that the US economy won't plunge into a recession in anticipation of the US government reining in the subprime turmoil.

Due to the US slowdown, the mainland economic growth may slow to 8 to 10 percent this year, Cheng said.

About the monetary policy, he suggested that the central government neither adopt a "one-size-for-all" policy to squeeze the innovative and fast-growth industries, nor suddenly hit the brakes to induce an economic hard-landing.

He also called for regulators to seriously check hot-money inflows and crack down on illegal financial activities.

(HK Edition 04/22/2008 page2)