Translated by Andrew Vanburen from a Chinese-language piece in Sinafinance
THE BEST WAY to breathe life back into China’s stock market is not to continually promote company-friendly policies, but to push investor-friendly measures.
In fact, in order to boost faith in the market and the fortunes of shareholders, it may be time to start relaxing or mothballing the myriad array of bourse regulations that have been put in place over the past several years to protect listcos and maintain market stability.
Confidence in the market must be rebuild and restored.
If you build it, they will come.
Following Wall Street’s meltdown over four years ago and the ensuing global economic crisis, there has been a flurry of new bylaws acting as ballast for China’s bourse.
China’s A-share markets are now two decades old, and have undergone tremendous growth and transformation.
But it is time for a new revolution to redefine the role of – and respect for – those without whom listed enterprises would quickly be in deep trouble... i.e. the retail investor.
And given the fact that our benchmark Shanghai Composite Index has been the world’s worst performer for much of this year, the time for change is riper now than ever before.
If market history has taught us anything it is that sudden selloffs and prolonged bear markets are a very natural and healthy phenomenon in a healthy bourse, and should not be necessarily loathed or feared out of hand.
But what is terrifying for shareholders of any scale or experience is a market that behaves irrationally or illogically.
That is because regardless of how many sleepless nights investors spend researching and worrying over the latest trends, there is one market variable that even the most seasoned fund manager cannot prepare for – market irrationality.
Investors need to think and act rationally in their share buying and selling decisions.
And as a reward for their diligence, they at least deserve a market that acts and reacts responsibly and rationally.
Sinafinance has invited several financial sector heavyweights to convene and brainstorm for ideas to rejuvenate Chinese stocks and the market in general.
Its primary goal is to raise awareness of shareholder rights and create a more rational market environment.
This high-power powwow must produce realistic and actionable proposals.
In the 20 years of its growth, the PRC capital market has grown to reach a total capitalization of nearly 22 trillion yuan, or 46% of the country’s GDP.
This ranks China’s capital market market cap at No.3 worldwide, following the US and Japan.
Therefore, it is more imperative than ever that the rights of the growing ranks of Chinese shareholders are uplifted and preserved.
Only by putting investor rights ahead of corporate profits (at any cost) can the investment climate be stabilized and improved.
This will not only keep current participants involved and engaged, but also bring tentative shareholders waiting anxiously on the sidelines into the game.
And as far as the stock markets are concerned, the bigger the tent the better.
And the more the merrier.
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