Share prices on China's exchanges rebounded from a five-year low this week amid rumors of a reshuffle of market regulators.
Reports in the state-run media that the chairman of the China Securities Regulatory Commission, Shang Fulin, would be replaced by a former Shanghai official have raised market players' hopes that the government will take action to revive share prices.
Shares began rebounding Tuesday amid rumors that Huang Qifan, who is currently deputy mayor of the city of Chongqing, would take Shang's place.
Sources at the commission, speaking on condition they not be named, confirmed news of the reshuffle. It has not yet been publicly announced, possibly pending approval by a top level Communist Party meeting that began Thursday in Beijing.
The state-run newspaper Guangzhou Daily and several Web sites also reported the expected change.
Shang's departure would follow that of former top Hong Kong stock regulator, Laura Cha, who has quit her job as a vice chairman of the commission for reasons the government has not explained.
A report in the financial newspaper 21st Century Business Herald said Cha's main reason for leaving was frustration over her lack of power within the government bureaucracy.
China's stock markets, located in Shanghai and Shenzhen, remain hybrids of capitalism and the country's planned economy. Authorities have encouraged speculative buying by small investors while relying on the markets to raise money for state firms.
Prices have languished in recent months, hurt by government efforts to slow economic growth by tightening credit. A flood of share offerings and speculation that the central bank might raise interest rates for the first time in nine years have also hurt investor sentiment.
The commission recently reported that the 1,380 listed companies suffered their biggest losses ever last month, with the market value of circulating stocks shrinking 49.4 billion yuan (US$6 billion; euro 4.9 billion), or by about a quarter since April. Trading volume shrank 26.5 percent.
"Stock market investors have been experiencing the equivalent of a roller-coaster ride over the past four months," the state-run newspaper China Business Weekly said in a recent commentary.
Huang is a former top leader of Pudong, Shanghai's newly developed financial center, where the stock exchange is located. As head of the city's economic commission in the late 1990s, he also oversaw the reorganization of major state-owned companies in preparation for stock market listings.
Huang is considered a longtime ally of former Communist Party chief and President Jiang Zemin, an advocate of rapid economic growth.
Local media reports and analysts said they expected Huang to take a systematic approach in reforming the market, while avoiding sudden moves that could spook already jittery investors.
On Wednesday, state media reported that the State Council, or Cabinet, has agreed in principle to let commercial banks launch their own fund management units, a move expected to draw funds into the market.
Until now, banks have been restricted to marketing funds produced for outside fund management companies.
"Investors expect that this move will channel more money into the stock market and bring about new revenue for banks," said Zhou Lin, an analyst at Huatai Securities in Nanjing.
Stock regulators also recently suspended new initial public offerings pending the creation of rules that would allow companies and lead managers to set IPO share prices _ a move aimed at preventing artificially high valuations and limiting volatility.
It remains unclear whether the change in command would do more to curb stock market abuses, which seem as rampant as ever despite efforts to clean up the industry.
>> China Business Info Center
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