China market reforms

Lots of news about the market reforms announced over the weekend. One of the best ideas is the push to increase the payout ratios. See: China market reforms could spur stocks

ZeroHedge reacted negatively to this news: China regulator: Will open capital markets further
China will encourage institutional investors, including social security funds, annuity funds and insurers, to increase capital-markets investment. It will encourage long-term investors--like pension funds and housing provident funds--to invest, too, Guo added.
I view this as an attempt to use institutions as market regulators, although the track record in the U.S. isn't a good one. Analysts and institutional investors tend to rubber stamp management's policies and since most Chinese stocks are state-owned firms, the odds of enhanced efficiency are small. Here's ZeroHedge's take: China Is Proud To Announce It Is Reflating The Bubble - Will "Actively Push" Investors Into Stocks
Needless to say, this act has sown the seeds of the Great Chinese Stock Market Collapse: artificial and forced capital reallocation is always and without fail the coffin in the nail of any ascendent attempt at central planning.

The A-share market has responded positively to the news of increased demand for stocks. Chinese Stocks Extend Rally over Reform Remarks

No comments:

Post a Comment