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China launches full-throated bid to boost confidence in stocks
SHANGHAI, Oct 20, 2018 (BSS/AFP) – China’s top economic supremo on Friday
led a coordinated drive by top financial officials to shore up confidence in
the country’s stock markets and economy, in a rare expression of concern over
what one called “abnormal” share price falls.
The intervention by Vice Premier Liu He and heads of the central bank and
securities and banking regulators comes amid a bruising stock downturn and
the release of data showing a slowdown in economic growth.
Liu, who has overall control of economy policy, sought to ease worries
about the effects of China’s increasingly bitter trade row with the United
States, which has seen both sides exchange tariffs on hundreds of billions of
dollars of goods.
He told state-run media that “the psychological impact is greater than the
actual impact” and that China’s suddenly more-affordable shares were
“creating good investment opportunities”.
Markets have tumbled on concerns over the economy, the China-US trade
standoff and an official crackdown on excess debt leveraging in the financial
system.
The losses have made China’s markets the world’s worst-performing in 2018,
with the benchmark Shanghai Composite Index down around 30 percent from a
January peak and sitting at four-year lows.
People’s Bank of China governor Yi Gang was quoted in Chinese media as
saying the economy maintained good momentum.
“Current stock market valuations are at historically low levels, which is
in contrast with China’s stable and improving economic fundamentals,” he
said.
Friday’s comments represent the highest-level effort yet to address
concern over equities and the economy.
The officials tried to ease fears that China was swerving away from
pledges of financial reform, and that private enterprises may suffer from a
strengthening state hand on the economy, though they announced no major new
reform initiatives.
The government said Friday morning the world’s second-largest economy
expanded 6.5 percent in July-September, the slowest quarterly pace in nine
years.
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The Shanghai and Shenzhen composite indexes fell early on Friday but
quickly rebounded after the comments filtered out. Both closed 2.58 percent
higher for the day.
Zhang Gang, a strategist at Central China Securities, said investors had
been awaiting strong signals from the government but that more than words was
needed.
“Although the rebound was large today, turnover remained low. The
government needs to strike while the iron is hot and implement positive
policies soon to fully restore confidence,” he said.
Banking regulator Guo Shuqing said Chinese financial market swings had
been “abnormal” and “seriously out of line” with China’s economic
fundamentals.
Donald Trump has embarked on a battle with China this year over what he
considers predatory trade practices.
Trump, who often boasts of the US stock market’s gains during his
presidency, has pointed to China’s equity troubles as a sign that Washington
was winning the trade conflict.
Share prices are a major source of official Chinese concern following a
2015 stock meltdown that the government is widely blamed with worsening
through policy missteps.
The officials said various measures would be introduced to ease Chinese
companies’ financing difficulties and further stabilise the financial system,
and that China would stick to a “neutral” monetary policy.
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