September 7, 2017 / 2:51 AM / 10 months ago

China should relax stock index futures trading as market recovers - Xinhua publication

SHANGHAI, Sept 7 (Reuters) - China’s stock market recovery has created the condition for regulators to further relax rules on stock index futures trading and fully exit emergency measures adopted during the stock market turbulence of 2015, a publication affiliated to the official Xinhua News Agency reported on Thursday.

The Economic Information Daily, in an opinion piece, also called for further reforms in initial public offerings, suggesting regulators stop window guidance in IPO pricing.

“In 2017, China’s A-share market has generally been stable. Market volatility has greatly decreased, valuation structure is getting more rational and investors’ confidence is gradually recovering,” the newspaper said.

“From current circumstances, the market has the condition to further promote market-oriented reforms and further relax stock index futures trading.”

China imposed a series of restrictions on stock index trading during the summer of 2015, when the Shanghai share index lost 40 percent of its value in three months, blaming derivatives for worsening a crisis that sent shockwaves across global financial markets.

In February, China’s securities regulators relaxed certain rules on stock index futures trading, and said the government would gradually unwind restrictions.

Chinese stocks have rallied to 20-month highs buoyed by a recovering economy as well as optimism over financial and economic reforms.

The Economic Information Daily said that China’s stock market has come out of the shadow of the 2015 crash and is “back to normal”, so there is room to “fully exit emergency restriction measures imposed during the crisis, and continue to push forward securities market reforms.”

Normalising index futures trading can allow investors to adequately hedge their risks, making China’s A-share market more attractive to institutional capital, the newspaper said.

In terms of IPO reform, the editorial suggested that the market should decide IPO pricing and timing, without the interference of regulators. (Reporting by Samuel Shen and John Ruwitch; Editing by Jacqueline Wong)

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