| Mainland to set up growth-stock exchange |
SHANGHAI, Mar. 7 -- The Chinese mainland may set up a second exchange for stocks of start-up companies and expand corporate bond trading this year, to provide investment options and help investors manage risk, the securities regulator said.
"China needs more financial instruments," Shang Fulin, chairman of the China Securities Regulatory Commission, said at the annual meeting of the Chinese legislature today in Beijing.
Shang, regulator of Asia's third-largest stock market, is trying to make China's publicly traded companies more transparent in the US$1.15 trillion equity market. Underscoring the challenge facing Shang, China's key stock index plunged 9.2 percent on February 27, sparking a global sell-off in stock markets from Tokyo to New York.
"There's a lot of money floating around the Chinese market, but there's still a lack of sophisticated
investment products," said Gabriel Gondard, who oversees the equivalent of US$3.5 billion at Shanghai-based Fortune SGAM Fund Management Co, a venture with Societe Generale SA.
"Institutional investors are keen to have more tools at hand to help manage their risks."
Echoing Shang's comments, China Financial Futures Exchange Chairman Zhu Yuchen today called for more financial products including futures, options and yuan derivatives. Zhu, speaking in an interview at the National People's Congress in Beijing, also said regulation must be increased.
China is speeding up the introduction of derivatives to spur development of capital markets. China's cabinet passed rules last month allowing trading of financial futures and options.
The Chinese government must prevent the market plunge from leading to bad loans and protect retail investors, the Chinese legislature's vice chairman Cheng Siwei said last month in the central bank's Chinese-language Financial News.
About 120 start-up companies already trade on a growth-enterprise exchange in southern China's Shenzhen city. A second such exchange in Shanghai would enable more companies that lack profit records to raise funds from China's 33 trillion yuan (US$4.33 trillion) in national savings.
"The experience with growth-enterprise markets around the region has been fraught with challenges, so we have to put in all the risk management features to ensure that the exchange can enjoy a healthy start," Shang said today.
The Chinese government also plans to allow more companies to sell corporate bonds and broaden the scope of trading in the market, Shang said, without giving additional information.
The Shanghai and Shenzhen 300 Index had its biggest daily decline in 10 years on February 27. The index rose 2.5 percent at the 11:30am trading pause in China, the second day of gains this week.
The mainland's three futures exchanges, in Shanghai, Dalian and Zhengzhou, now trade only commodities futures contracts, including copper, aluminum, rubber, fuel oil, soybeans, corn and sugar.
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