| Share volatility delays launch of new products |
SHANGHAI, June 2 -- The regulator is likely to delay unveiling derivatives and new trading mechanisms as the growing volatility in yuan-backed stocks has stoked worries such moves may lead to a market crush, sources said yesterday.
New investment products such as margin trading will be delayed until the end of next month as the regulator deems that technical preparations and investor education are still not sufficient, sources familiar with matter said.
The China Securities Regulatory Commission, the watchdog, and the Securities Association of China will extend their current training programs to senior executives at mainland-listed firms, the sources said.
They also cautioned that if the market continues to be on a rollercoaster ride, the launch of the new innovative products will be postponed to the fourth quarter or even to early next year.
"It's impossible for authorities to conduct any reforms if the index jumps five percent in the morning and then plunges four percent in the afternoon," said a senior stock executive based in the southern city of Shenzhen, Guangdong Province.
"Only when the market shows signs of cooling and growing steady will the regulator consider innovation. Otherwise the reforms are likely be used (by investors) as an excuse to sell and may hurt stability (of the market)."
The central government started last year to prepare for a myriad of capital-market overhauls including the introduction of short selling, stock-index futures as well as covered warrants.
But the revamp, which was to have debuted as early as the first quarter of this year, has been delayed as domestic stocks began to soar early this year, and hitting a rise of more than 50 percent so far this year, the sources said. No new timetable has been set, the sources said.
Margin trading and short-selling allow investors to borrow money or shares from brokers, which are expected to further shore up liquidity and allow investors to bet on a market's drop to profit.
Covered warrants refer to warrants issued by brokerages over shares of listed companies, which permit holders to buy or sell a pre-set amount of stocks during a fixed time period in the future.
Yuan-backed shares seesawed this week after the Ministry of Finance announced late Tuesday a tripling of the stamp duty on share trading to 0.3 percent. The benchmark Shanghai Composite Index slumped 6.50 percent on Wednesday but rebounded 1.40 percent on Thursday. The index lost 2.65 percent yesterday after climbing as high as 1.75 percent in intraday trading.
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