Trading on China’s new stock market catering to smaller companies will begin Oct. 23, the chairman of the country’s securities regulator said Saturday.

The Growth Enterprises Market is meant to nurture private companies that struggle to get financing in a system favoring big state enterprises.

Shang Fulin said the first day of the new board will see an initial batch of 28 companies listed and available for trading, according to the official Xinhua News Agency.

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China’s benchmark stock index fell the most in nine months as foreign direct investment plunged, Ping An Insurance (Group) Co.’s profit missed estimates and Yunnan Copper Industry Co. said there are “no clear signs” of a recovery.

Ping An, the nation’s second-biggest insurance company, fell 3.9 percent after first-half net income dropped 45 percent. Yunnan Copper sank the 10 percent daily limit after posting a first-half loss and the metal dropped by the maximum in Shanghai. Foreign direct investment fell 35.7 percent in July as companies stalled expansion plans amid the global financial crisis.

The Shanghai Composite Index, tracking the bigger of China’s exchanges, fell 176.34, or 5.8 percent, to 2,870.63 at the close, the worst day since Nov. 18 and the lowest since June 18. The gauge has declined 17 percent from this year’s high on Aug. 4 on concern a slump in exports and new loans will damp economic growth. It remains 58 percent higher this year.

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Citic Securities Co. and three other brokerages may be allowed to offer loans for stock purchases as China’s government seeks to bolster the market after the benchmark index slumped 66 percent this year.

Haitong Securities Co., Guotai Junan Securities Co. and Everbright Securities Co. may also start margin trading as early as mid-November under a pilot program by the securities regulator, an official with knowledge of the matter said, declining to be identified because the information isn’t public.

The China Securities Regulatory Commission aims to lure investors and expand the nation’s capital market as slumping stock values erode trading. Brokerages may earn 6.6 billion yuan ($966 million) of interest income from margin trading and short selling next year, the Shanghai Securities Journal reported Oct. 6, citing an estimate from Haitong.

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China’s securities regulator said Sunday it would shortly begin a trial program allowing securities firms to engage in margin lending and short selling, long considered necessary to help the country’s stock market mature beyond its repeated boom-bust cycles.

The China Securities Regulatory Commission said in a statement on its Web site that the program would be started, but it didn’t give a timeline. It said the brokerages allowed to participate in the program would be decided based on their net capital size and risk capabilities, among other criteria. The trial would be expanded at some point, it said.

A broker talks on the phone at a brokerage firm in Hong Kong.
Margin trading allows investors to borrow money to buy shares. Short selling allows investors to sell borrowed stocks, typically in a bet that prices will fall.

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Only eight years after mysterious, lightning-quick transactions shuttled millions of yuan through his trading accounts did Yu Yinzeng realize that he might have been part of a money laundering scheme.

Instead of focusing on stock investments as he used to be, Hangzhou-based investor Yu had been for the last three years pre-occupied with a dispute between him and the sales department of Hangzhou Qingchunfang under the Caitong Securities.

Yu suspected the latter might have used his account for money laundering.

Looking back through his old account records, Yin noticed two sets of massive, rapidly-executed deposits and withdrawals.

“Had I not reviewed the old records, I would never know such transactions ever existed,” Yu said.

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China’s securities regulator Wednesday issued detailed rules on overseas investments of securities companies and funds, expanding its overseas investment program for domestic investors.

The continued expansion of the program comes a week after the State Council, China’s Cabinet, said it will widen channels for capital outflows, as Beijing seeks to curb flush liquidity brought about by its external imbalances.

Under the rules, brokerages and funds will be able to invest in a wide range of financial products traded abroad. These include shares, bonds, futures, bank deposits, bank bills, government and corporate bonds, convertible bonds, and asset-backed securities. [Full Text]

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China’s government doubled the maximum length of imprisonment for securities manipulators to 10 years, a move that may help boost investors’ confidence in the nation’s stock markets as state companies including Air China Ltd. prepare to sell local-currency A shares for the first time.

In addition, a law enabling jail terms of up to seven years for corrupt senior managers of state-controlled enterprises was extended to include all listed companies, according to the central government’s Web site.

Mismanagement, corruption and stock-manipulation contributed to a slump in Chinese stocks that caused the Shanghai Composite Index to more than halve in the four years through July last year. The index, having rebounded 66 percent from its July 7 low, is still 25 percent below its 2001 peak.

[Full Text]

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Hong Kong’s central banker on Thursday challenged his Chinese counterparts to increase the pace and scope of financial liberalisation, urging them to allow mainland investors to purchase Hong Kong securities and permit renminbi bond issuance in the territory.

Wading into a previously internal Chinese debate about whether financial reforms have advanced too far too fast, Joseph Yam, chief executive of the Hong Kong Monetary Authority, said bolder measures were necessary to prevent Hong Kong “from being marginalised as a [financial] intermediary”.

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