Securities regulator vows steps to restore market stability

China’s securities regulator said on Friday that maintaining stock market stability andrestoring investor confidence are still its top priorities, despite the recent turbulence whichdampened market sentiment and trading volume.

The regulator has met with all major securities brokerages and funds and urged them tobetter control their margin trading and short sales business, both of which have been blamedfor the recent roller-coaster ride in the A-share market, according to Deng Ge, the spokesmanof the China Securities Regulatory Commission.

Zhang Yujun, assistant chairman of the CSRC urged financial institutions to prudently controltheir scale of assets in leveraged trading and said these should be appropriately matched withthe capital position and risk management capability.

Zhang also reiterated that the regulator has banned risky margin financing through non-brokerage channels and will step up the crackdown on using program trading to “maliciously”short the market.

Deng told a news conference on Friday that the regulator will also target speculative tradingof stock index futures and prohibited futures companies from offering margin lending forclients to trade futures contracts.

The A-share market rallied on Friday, with the benchmark Shanghai Composite Index rising2.26 percent to close at 3,744.2 points. The smaller Shenzhen Component Index gained 2.67percent to close at 12,753.05.

US investment bank Goldman Sachs Group Inc has estimated that the Chinese governmenthas injected up to 900 billion yuan ($147 billion) in the past two months to try to prevent amarket meltdown.

Bloomberg also reported that State-owned margin lender China Securities Finance Corp hasbeen seeking an additional 2 trillion yuan to buy stocks. The move would bring its totalmarket-rescue fund to 5 trillion yuan.

The government has also adopted a series of measures to halt the recent market rout thatwiped out nearly $4 trillion in market value. The regulator has halted new share offerings andbanned major shareholders from selling shares in their companies for six months.

Rumors that the regulator may once again permit listed companies to augment capital withadditional share issues have also weighed heavily on market sentiment.

Xu Biao, chief strategist with Essence Securities Co said the move will hit the market in theshort term, but will dissipate in the long term.

On Friday, the regulator said it will continue to clamp down on insider trading which hasseriously hurt the market order and investor interest.

Deng said the market regulator will specifically target the act of prying for non-publicinformation through advantageous social connections and leaking market-sensitiveinformation through online social networks.