HONG KONG/BEIJING, July 29 (Reuters) - China stepped up
attempts to calm frayed investor nerves after a wild markets
rout this week by telling foreign brokerages not to
"overinterpret" its latest regulatory actions, setting the stage
for a rebound in beaten-down stocks on Thursday.
Chinese state media also joined in to say yuan-denominated
assets in China remained attractive and that short-term market
panic did not represent long-term value.
China stocks had their best day in two months on Thursday.
The blue-chip CSI300 Index jumped 1.9% and the
Shanghai Composite Index gained 1.5%, but for the week,
the gauges are still down 4.7% and 3.9%, respectively.
Shenzhen's start-up board ChiNext jumped 5.3%,
recouping nearly all of this week's savage losses.
Hong Kong's Hang Seng Index ended Thursday up 3.3%,
shrinking this week's loss to 3.7%. The Hang Seng Tech Index
, the target of a heavy sell-off earlier this week,
surged 8%, but is still down 4.3% for the week.
The gains came after the securities regulator on Wednesday
night held a meeting with executives of top global investment
banks with an aim to calm financial markets nerves, people
familiar with the matter told Reuters.
The meeting added to official efforts to shore up investor
confidence, which has been dented by Beijing's sweeping
regulatory actions that hit firms in the $120 billion private
tutoring sector and technology behemoths.
"This is more to calm the market to isolate the education
industry and not to overinterpret it," said one of the people,
who has knowledge of the meeting held by China Securities
Regulatory Commission (CSRC) vice chairman Fang Xinghai.
At the meeting, Fang told the bankers that official policies
would be rolled out more steadily to avoid sharp volatility in
the markets, said another person, adding Fang also indicated the
crackdown was not aimed at decoupling Sino-U.S. financial
Executives from investment banks Credit Suisse,
Goldman Sachs, JPMorgan and UBS, among
others, attended the meeting, said the people, who declined to
be named as they were not authorized to speak to the media.
The regulator only invited those foreign brokerages with
existing licenses to operate in the country, said a separate
person with knowledge of the meeting.
CSRC did not immediately respond to Reuters' request for
comment. Representatives at Credit Suisse, Goldman, JPMorgan,
and UBS declined to comment. Bloomberg first reported the
regulatory meeting on Wednesday.
"Recent events definitely have a negative impact on the
global investor sentiment about China. So the risk is whether
the long-term money will also pull out of China," said Wang Qi,
CEO at fund manager MegaTrust Investment (HK).
"In terms of the foreign capital flows, whatever happened
lately was mostly driven by hedge fund type hot money ... we
welcome any Chinese government moves to increase transparency
and rebuild investor confidence."
Responding to a question on whether foreign investors would
be wary of investing in Chinese firms as a result of the
regulatory crackdown, foreign ministry spokesman Zhao Lijian
told a regular briefing on Thursday: "We have been providing a
fair, open and non-discriminatory environment for companies.
What you mentioned is just not true."
The CSRC meeting followed a brutal sell-off in shares of
Chinese companies this week after investors were spooked by
Beijing's rules that ban for-profit tutoring in core school
The new rules for the private education companies closely
followed China's antimonopoly campaign against technology giants
and new regulations for home-grown companies looking to list
Qian Wang, Vanguard Group's Asia-Pacific chief economist,
said that it's natural for global investors to be exposed to
higher regulatory risks when it comes to investing in China.
"Although China is the world's second-biggest economy, it
remains an emerging market with economic, policy and regulatory
uncertainty," Wang said. If investors seek higher return, "you
need to bear higher risks, which is natural," she said.
Beijing stepped up efforts to soothe investor nerves over
the last couple of days amid concerns that a sharp sell-off in
equities could have a spillover effect to other asset classes,
including bonds and foreign exchange.
The state-backed China Daily said Beijing remained
supportive of domestic companies seeking to list overseas and
that regulators would soon unveil more measures to further open
capital market to foreign entities.
(Reporting by Binbin Huang, Cheng Leng, Samuel Shen, Scott
Murdoch; additional reporting by Cate Cadell; Writing by Sumeet
Chatterjee; Editing by Sam Holmes and Ana Nicolaci da Costa)