China's securities regulator attempts to prop equity markets by urging fund managers against selling unless faced with redemption pressures – an untimely move for a country undergoing a landmark opening of its financial sector.
The China Securities Regulatory Commission (CSRC) was verbally providing so-called «window guidance» to major asset managers yesterday, according to a «Reuters» report citing unnamed sources. It also called for continued restraint against selling in the coming days, the sources added.
The number of confirmed cases in mainland China continues to pile up, now reaching more than 20,000 infected victims and 400 deaths. Despite the CSRC's efforts to contain the natural response to the outbreak, the Shanghai Composite Index closed nearly 8 percent lower on Monday following an extended Lunar New Year break.
Bad Timing
That this kind of market intervention is occurring now is an untimely matter for China which is not only undergoing a historic opening of its financial industry to foreign participation but is also increasingly being included in major indices that are benchmarked by global fund managers. Transparency and governance have long been amongst the criticisms investors overseas have lashed against the second-largest economy which just won the U.S. Treasury’s removal of its label as a «currency manipulator» earlier in January.
In addition to the CSRC, the People’s Bank of China also attempted to inspire calm in the markets by providing 1.2 trillion yuan ($170 billion) in liquidity. Chinese authorities have made various other moves to provide more financial buffer including instructions to local lenders to roll over affected loans, tolerate mortgage and credit card repayment delays and maintain credit lines open to small businesses.
