China’s new top securities regulator Yi Huiman is giving his hotly anticipated first press conference today — and he'll possibly reveal the timetable for the country’s new high-tech board.
Yi, who was appointed chairman of the China Securities Regulatory Commission last month, was previously rumored to be giving his first press conference in late January. The rumors turned out to be false, but investors expecting news that the short-selling mechanism would be promoted and fraud crackdown would be intensified were spooked, dragging down the Shanghai Composite Index by nearly 2% in a couple of hours.
Aside from the high-tech board, Yi may also signal his stance on regulation today, as he steps into the shoes of predecessor Liu Shiyu, who favored tougher regulation of China’s securities market.
Stay tuned for live updates.
WRONGDOING: Yi said China will firmly crack down on wrongdoings in the capital market, including market manipulation, insider trading, and fraud in securities issuance, financial reports, and mergers and acquisitions.
Yi added that China would push for revisions to the Securities Law to “significantly raise the costs of violating the law and regulations of the capital market.”
LOWERING BARRIERS: Yi said China will eliminate the hurdles for social securities funds, insurance funds, and pension funds to enter the stock market, to push forward the reform and opening up of China's capital market and further improve the trading mechanism.
MARKET ROLE: Yi said China will let the capital market "fully play its role" in allocating resources, setting prices of assets and mitigating risks to make the financial sector better serve the real economy.
Yi: Setting up a registration-based high-tech board is a major institutional innovation. CSRC will evaluate the impact of the innovation, and coordinate future reform of the ChiNext board and the over-the-counter market.
Yi: The high-tech board has made many innovations in share offerings, listing, trading and de-listing. The board has had many breakthroughs, so it's not about simply adding a new board, but rather core reform and innovation.
Yi: The board is intended to building an IPO system with information disclosure at its center and gain reform experience that can be “duplicated and rolled out."
CSRC Vice Chairman Fang Xinghai: The board’s loosening of rules on eligibility of companies to be listed, including the relaxation of profit requirements, comes on the condition that information disclosure will be tightened, which is the core of testing registration-based IPOs.
CSRC Vice Chairman Li Chao: It's reasonable for investors to worry about the impact of the high-tech board on the secondary market. But the board has its own strict standards and procedures, and will respect market mechanisms, so capital won't be flooding into the new high-tech board.
Vice Chairman Fang: Authorities will subject intermediary organizations for IPOs on the high-tech board, including securities companies, accounting firms and law firms, to high scrutiny, to ensure those who violate laws and regulations will be held accountable and punished. Fraud in information disclosure and fraudulent share issuance will be penalized harshly.
Yi: We need the joint effort of various market participants to implement innovation. For example, share issuers should fully disclose information, as should bookrunners and investment bankers. One of the biggest unique features of the high-tech board is the pricing and underwriting of shares. It will test the core competitiveness of investment banks. We are worried that some domestic brokerages might lack related experience, and it's important for them to do full preparation to improve their capabilities. It's the most important market-oriented factor of the board.
Li: Stock prices could be rather volatile in the early stage of the high-tech board and the pricing of shares of some companies may not meet market expectations, because it takes time for the policy innovations to be tested and improved, and the high-tech industry faces greater uncertainty than conventional sectors. The CSRC urges tolerance and understanding for such potential issues.
Shanghai Stock Exchange Chairman Huang Hongyuan: The SSE is analyzing public comments on the draft rules of the high-tech board. It will make “necessary revisions” to the draft under the guidance of the CSRC and publish the new version after it is approved.
Huang: Potential companies that could be listed on the high-tech board are in industries including new generation information technology, biology, high-end manufacturing and new materials. Many of the firms are located in Beijing, the Pearl River Delta, the Yangtze River Delta, Wuhan, Chengdu and Xi’an. They have invested heavily in research and development and have good growth potential.
Huang: IPO application filings by these companies are unlikely to flood in at the same time because their preparation work is at different stages. Relatedly, an anti-corruption board will be set up to supervise the IPO review work.
TRADE WAR: Yi: Progress in China-U.S. trade talks has a positive impact on the operation of listed companies in China. The CSRC will keep a close eye on potential impact the trade friction will cause on pledged stocks and bond issuance and take measures tailored to different companies to deal with the uncertainties.
VALUATION: Li: The primary market has seen overly high valuation of high-tech companies. The high-tech board aims to achieve reasonable valuation of these enterprises through market-based mechanisms, rather than judgement by the CSRC or the SSE.