China is likely to roll out more measures to better protect investor rights at the high-profile Lujiazui Forum later this month, with focus on strengthening investor compensation in cases of interest infringement and delisting, analysts said on Wednesday.
They commented after Wang Li, deputy director of the China Securities Regulatory Commission’s general office, said on Tuesday that the commission will release new capital market policies at this year’s Lujiazui Forum, which will be held in Shanghai from June 19 to 20.
The announcement has sparked speculation that significant regulatory changes may be in the offing, especially those related to settlement rules.
On Wednesday, the benchmark Shanghai Composite Index, however, closed 0.83 percent down at 3065.4 points, having rebounded on Tuesday.
Analysts close to the matter said any new policies would likely focus on ensuring solid implementation of the nine measures unveiled by the State Council, China’s Cabinet, in April. Those measures serve as a development blueprint for the country’s capital market and stress strengthened regulation and enhanced investor protection.
Analysts said some measures are still needed but appear less likely to be announced at the forum. These include steps for market stability, including establishment of a stock stabilization fund and a T+0 trading mechanism for select stocks. The T+0 mechanism means the settlement of stock trades occurs on the same day when the trade is executed, as against the next day (T+1) mechanism now effective in the A-share market.
“The SCI has fluctuated around the 3,100-point mark recently, making investors look forward to more positive policy measures to improve the sentiment,” said Yang Delong, chief economist at First Seafront Fund.
The measures anticipated at the Lujiazui Forum may aim to encourage listed companies to increase cash dividends, establish a compensation mechanism to protect investor interests and strengthen crackdown on behaviors that infringe investor interests, Yang said.
A chief economist at a Shenzhen-based securities firm who sought anonymity citing compliance issues, emphasized the urgent need for a well-functioning mechanism to compensate investors for losses due to delistings, as the number of delistings increases amid the country’s push for stricter delisting standards.
“Efforts should also be made to expand the size of the government-funded investor protection fund to aid or compensate small investors in distress,” the economist said.
Sharing similar sentiments, Yang Haiping, a researcher at the Central University of Finance and Economics’ Institute of Securities and Futures, said he anticipates the CSRC will likely announce measures aimed at enhancing investor protection and boosting investor confidence.
“These (expected) measures will likely primarily address the compensation and restitution for investors in cases like financial fraud and delisting scenarios where investors’ legitimate rights are infringed,” Yang said.
Another potential policy focus expected is the launch of a system that positively correlates the performance of financial products like funds and wealth management products with the management fees they charge to investors, Yang said. “If investors do not make a profit, the fees should be zero.”
