An overnight statement backed by little real action keeps the equities market in Shanghai and Hong Kong in no-man’s land - and investors on tenterhooks. 

If you are a free market fundamentalist, you probably think the China Securities Regulatory Commission (CSRC) is doing exactly the right thing.

In a statement released late Sunday (Google translation from Chinese), the CSRC said it would be looking at various parameters – looking at increasing the number of on-site inspections of listed companies and supporting the listing quality of listings, among other things.

Cracking Down

It also indicated it would be looking at more de-listings while cracking down on market manipulation, short-selling, insider trading, and fraudulent issuance.

That would be great in normal times. But this is anything but right now as equity markets in China, and by extension, Hong Kong, have been falling for four consecutive years. 

Dropping Index

When finews.asia first started commenting on the current equity market crisis at the tip end of last year, the Hang Seng index was testing the 17,000 level.

An update in late January had it testing the low 16,000s, down well more than half of its all-time high in 2018. Then, in the middle of last week, we had it testing the mid-15,000s. And there it has stayed, despite all the fretting by investors, and regulators, about the market. The main Shanghai index, the SSE Composite, has been no different, falling to five-year lows last week.

Brief Glance

But as both indexes chase a parabolic arc lower and steadily weakening thresholds of resistance that would make any chart technician proud, what can the mainland regulator do?

A brief look at a somewhat recent paper released during the pandemic by the International Monetary Fund (IMF) about the measures that the regulator should have in place during a crisis seems largely in place. If not, then they are at least touched upon.

More Concrete Measures

As is usual, investors and the media are calling for something far more concrete, and that seems to be keeping the market in the doldrums although a  report on the Bloomberg news service indicates (paywall) a growing view that the market is in the process of bottoming out.

The CSRC statement also says it is interested in helping medium and long-term investors enter the market and that it needs to «listen carefully» to investor concerns. If the market is bottoming out, that might just be the best thing to do. As if you are that same self-said market fundamentalist, you don’t want to necessarily be seeing massive market intervention even if the average investor is loudly calling out for that to happen.