Newspaper article The Christian Science Monitor

Chinese Traders Applaud Action by Beijing to Slow Stock Market

Newspaper article The Christian Science Monitor

Chinese Traders Applaud Action by Beijing to Slow Stock Market

Article excerpt

TO Shanghai stockbroker Zhu Guopin, the Chinese government's rescue package for the country's infant stock markets was a godsend.

After a 80 percent fall in share prices from a 1993 high stirred fears of a further market collapse, shares in Shanghai and Shenzhen surged in the last two weeks on news of government intervention to bolster investor confidence.

The China Securities Regulatory Commission announced that it was allowing foreign investment in so-called A-shares, previously reserved for Chinese, and suspending new A-share listings this year. This action is a step toward the merger of A-shares and B-shares, which are only available to foreigners, once the Chinese yuan becomes a fully convertible currency.

Beijing announced additional measures this week to blur the lines between the A- and B-shares, unveiling new legislation that would allow local investment in the B-share market. The proposed new law also would restrict foreign ownership of listed Chinese companies to 35 percent, preventing overseas investors from gaining control of large state-owned enterprises.

"This is what we were hoping the government would do for months," says Mr. Zhu, a young trader with Hainan Province Securities Company. "Let's hope it lasts."

But Chinese and Western analysts say this month's buying frenzy also underscores the continued volatility and potential for dizzying price swings in China's fledgling markets.

Just three years ago, China opened two stock markets that have drawn more than 5 million Chinese investing in only about 200 listed companies. Although initially millions flocked to buy what they thought was a ticket to instant riches, for the last year the markets have suffered under pressure from austerity moves designed to choke easy credit and cool the fast-paced economy.

Today, in the wake of the latest buying spree, the outlook remains cloudy. The tenacity of the stock surge prompted rumors that state enterprises under government control and acting on official orders were behind the share price jump.

Another theory was that investors from Hong Kong and Taiwan illegally entered the A-share market expecting that it will soon be open to foreigners, Chinese analysts say. …

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