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China's Top Stock Regulator Gives Up On "Immature" Market, Hands In Resgination

Tyler Durden's picture




 

Earlier this month, China tried to implement a circuit breaker designed to guard against the turmoil that’s been reverberating through the country’s equity markets since an unwind in a half dozen backdoor margin lending channels triggered an ugly meltdown last summer.

Although the CSRC launched a concerted effort to prop up the market by creating the so-called “national team” which bought nearly CNY2 trillion in shares from June through the end of the year, Beijing has been unable to restore a sense of normalcy.

The inability to stabilize mainland equity prices partly stems from the fact that 80% of the market is comprised of retail investors who are keen on selling any rips in a futile attempt to recover some of the $5 trillion that’s been wiped off the SHCOMP and the Shenzhen in the ongoing rout. Rampant uncertainty surrounding the country’s new FX regime hasn’t helped matters.

Going into the new year, China had tried everything to stop the bleeding up to and including arresting those suspected of contributing to the selloff even when the actions of the accused were perfectly legal. In a kind of Hail Mary maneuver, CSRC chief Xiao Gang dreamed up a circuit breaker which went into effect on January 4. The mechanism halted trading on the SHCOMP and the Shenzhen for the remainder of the trading day in the event the CSI300 fell 7%.

Put simply: the effort was a miserable failure. Apparently, it didn’t occur to anyone in Beijing that by halting trading for the entire day, the selling pressure would only build and spillover into the next session, creating an endless string of limit down halts as investors panic sell at the open. The circuit breaker was abandoned after just three days.

The fiasco was humiliating for CSRC chief Xiao Gang who on Saturday said elevated volatility in China is the result of an "immature market, inexperienced investors, an imperfect trading system and inappropriate supervision mechanisms." Now, apparently at a loss for how to right the ship, Xiao is ready to throw in the towel. “Xiao Gang, the embattled head of China's securities regulator, has offered to resign,” Reuters reported on Monday, citing unnamed sources close to the Party. 

“The (Communist Party) central (leadership) is extremely unhappy with Xiao Gang. It is certain he will change jobs," one source said.

"Xiao Gang handed in his resignation last week," a “financial industry source” confirmed.

Xiao’s term as chairman doesn’t technically end until 2018, but we can’t exactly blame him for wanting to duck out early. As noted above, the CSRC’s efforts to keep the equity dream alive for the hordes of everyday Chinese who plowed their life savings into the market have been nothing short of unprecedented and at times bordered on the comically absurd. At one point for instance, the regulator simply halted trading in 75% of listed shares indefinitely. In another now famous boondoggle, Beijing arrested a journalist for printing a story that moved futures in the “wrong” direction.

It seems likely that Xiao has run out of ideas. It’s also possible that he fears for his freedom. After all, CSRC officials were among those arrested last year. Indeed, vice chairman Yao Gang came under investigation for graft shortly after a series of brutal selloffs in China rocked global markets in late August.

While Reuters says there are three candidates short-listed to replace Xiao, it’s not clear that i) anyone wants the job, or ii) that the Party will be willing to suffer further reputational damage by admitting that the country’s top securities regulator has effectively given up on the market.

So essentially, the Politburo would probably like nothing more than to have Xiao's head delivered on a silver platter (figuratively speaking we hope), but the optics around his exit would likely mean even more selling by the country's millions of semi-literate, newly-minted, over leveraged daytraders who would see the CSRC chief's ouster as still more proof of that the Chinese stock market is, in the words of one 48-year-old bank accountant from Kunshan, "a mess."

The CSRC said rumors of Xiao's resignation are unfounded. 

"This information does not conform to the facts," the agency said, in a characteristically hilarious statement.

We shall see. In the meantime, anyone who's interested in trying their hand at corralling the most unruly equity market on the planet is encouraged to update their CV and send it to Xi. But be forewarned, this is one job where failure could land you in a Chinese prison for the rest of your days.

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Mon, 01/18/2016 - 15:05 | 7062684 shervin2
shervin2's picture

Sum Ting Wong Mista Xiao?

Mon, 01/18/2016 - 15:09 | 7062725 Son of Loki
Son of Loki's picture

He probably wants to retire to a $8 million house in Vancouver or SF is my guess.

Mon, 01/18/2016 - 15:26 | 7062802 Pinto Currency
Pinto Currency's picture

 

 

Xiao Gang letter - quote: "In short, this stock market reminds me of a Chinese fire drill."

Mon, 01/18/2016 - 16:00 | 7063021 nmewn
nmewn's picture

"It's not my fault! It is inexperienced investors! An immature market! There was inappropriate supervision, I had a flat tire, there were swarms of locusts, imperfect supervision, a fire, an earthquake, a giant flood. Please God, you're got to believe me, IT WASN'T MY FAULT!!!" - Joliet Xio Jake Blues Gang 

Mon, 01/18/2016 - 16:29 | 7063186 weburke
weburke's picture

the guy flapped his mouth, was he drunk? 

Mon, 01/18/2016 - 15:59 | 7063012 theXman
theXman's picture

Let's be clear: there is no "resignation" here, he was appointed by the politburo and fired by politburo. He has no personal choice in this. If he dares to raise any objections, he will end up in jail.

Mon, 01/18/2016 - 18:14 | 7063734 Bunga Bunga
Bunga Bunga's picture

The communist central planners will rather chop off his head before they let him live in a million Dollar shack in Canada.

Mon, 01/18/2016 - 15:49 | 7062963 dead hobo
dead hobo's picture

No, he just got tired of reporting to Barney Fife.

Mon, 01/18/2016 - 15:06 | 7062698 _ConanTheLibert...
_ConanTheLibertarian_'s picture

Ciao Gang!

Mon, 01/18/2016 - 15:07 | 7062701 ISEEIT
ISEEIT's picture

Shit...el bozo is already running the ussa.

Krugman might be tempted but otherwise who is truly qualified?

Mon, 01/18/2016 - 15:08 | 7062718 NoDebt
NoDebt's picture

Corzine.

Mon, 01/18/2016 - 16:07 | 7063060 SillySalesmanQu...
SillySalesmanQuestion's picture

Ben "Bubbles" Bernanke

Mon, 01/18/2016 - 15:07 | 7062709 Son of Loki
Son of Loki's picture

It’s a buyers’ market as Hong Kong flat owners slash prices to secure sales

 

Plagued by weakening market sentiment, rising interest rates and a slowing economy, flat owners in Hong Kong are feeling compelled to slash prices to attract buyers, pushing secondary home prices down for four straight months.

Home prices at 50 housing estates monitored by property agent Ricacorp Properties fell 1.8 per cent in December.

 

http://www.scmp.com/business/article/1900997/its-buyers-market-hong-kong...

 

Global RE is following stawks downward looks like...slower because of the massive manipulation but gradually sinking lower acorss most areas excpet maybe key cities like Tokyo, Seattle, Portland and a handful of others.

 

Mon, 01/18/2016 - 15:16 | 7062776 DirkDiggler11
DirkDiggler11's picture

Ha, if you rent in Hong Kong WB7 may end up being your landlord. Would that be some shit.

Mon, 01/18/2016 - 18:32 | 7063804 Handful of Dust
Handful of Dust's picture

Hk is still outrageously high compared to local salaries I read. The prices are due to the flood of Loot from Mainlander VIP's who literally carry suitcases of cash across and put into anything RE since the gubmint does not trace them there...yet.

Mon, 01/18/2016 - 15:08 | 7062712 NoDebt
NoDebt's picture

"What we have here is... failure to manipulate."

You think they hire these guys to run an orderly, fair and transparent market?  Any idiot can do that.  They want RESULTS and they want them RIGHT FUCKING NOW.

Mon, 01/18/2016 - 15:08 | 7062713 GMadScientist
GMadScientist's picture

Kudos to this guy for pointing out the fucking obvious despite the gun to his head.

Mon, 01/18/2016 - 15:10 | 7062731 NoWayJose
NoWayJose's picture

At least he had a choice - resign or 'disappear'

Mon, 01/18/2016 - 15:11 | 7062732 buzzsaw99
buzzsaw99's picture

he can't leave yet. the year of the goat is not over.

Mon, 01/18/2016 - 15:12 | 7062745 small towel
small towel's picture

"This information does not conform to the facts"

Isn't that Dallas Fed speak?

Mon, 01/18/2016 - 15:16 | 7062774 buzzsaw99
buzzsaw99's picture

the dallas fed doesn't speak. they also don't eat pork.

Mon, 01/18/2016 - 15:13 | 7062748 i_call_you_my_base
i_call_you_my_base's picture

Impossible job. Even if you wanted to do the right thing you would never be allowed.

Mon, 01/18/2016 - 16:07 | 7063061 FreedomGuy
FreedomGuy's picture

The basic reasons he gives add up to the belief that the only proper direction of the market is upwards. 100% YOY increases are perfectly normal and a sign of wise mature investors.

To do the opposite is to be immature and unwise.

The other problem always cited by 100% of governments worldwide is lack of control. If they just had a little more power and control it would all work out... forever.

Mon, 01/18/2016 - 17:16 | 7063420 ebear
ebear's picture

"Impossible job. Even if you wanted to do the right thing you would never be allowed."

Which is why you'll never find capable people operating at that level. Intelligent people understand the relationship between authority and responsibility. Taking the fall for someone else's mistakes is not usually one of their career objectives.

What the CCP has done by targeting individuals is to ensure that no one capable is going to step into the breach they themselves created. All you'll get is self-serving climbers who'll roll the dice that they can get theirs before the CCP gets them. These are the people buying homes in Vancouver, BTW.

Mon, 01/18/2016 - 17:39 | 7063570 slicker
slicker's picture

"Impossible job. Even if you wanted to do the right thing you would never be allowed."

Which is why you'll never find capable people operating at that level.

Given the quality of candidates for president of the US, the people appointed to various cabinet positions (think Dept. of "Justice") and the Fed, are we any different?  Really is the best this country can offer represented by the list of Republicans and Democrats running for president?

We're in deep shit.

Mon, 01/18/2016 - 18:12 | 7063727 neuronius
neuronius's picture

Really is the best this country can offer represented by the list of Republicans and Democrats running for president?

No, but it's the best that these two criminal gangs can put together.

Mon, 01/18/2016 - 15:14 | 7062755 DirkDiggler11
DirkDiggler11's picture

Maybe the Chicom's are taking " lying lessons" from the Dallas Fed ?

Mon, 01/18/2016 - 15:16 | 7062770 fatlibertarian
fatlibertarian's picture

Why don't they just make it illegal for the markets to ever go down?

Liberal thinking 101.

Mon, 01/18/2016 - 15:17 | 7062777 Dr. Engali
Dr. Engali's picture

One would think that China being the original issuer of fiat would have a better handle on printing. Maybe the problem is all their printers are made in China.

Mon, 01/18/2016 - 15:28 | 7062828 neuronius
neuronius's picture

"Those damned free-willed people!  Trying to make decisions on their own... They're not experienced enough and don't know what they're doing, we need to tell them what to do!"

- some Central Planner, somewhere

 

 

Mon, 01/18/2016 - 15:29 | 7062834 Iam Yue2
Iam Yue2's picture

That's right mate, blame it on everybody else.

 

The Chinese, perhaps unsurprisingly do not undertand how financial markets work.  And no amount of praying on the part of Hugh Hendry is going to change things anytime soon. 

Mon, 01/18/2016 - 15:30 | 7062841 The Duke Of Fro...
The Duke Of Frontenac's picture

Chinese nail gun go pow-pow-pow.

Mon, 01/18/2016 - 15:38 | 7062890 Sir SpeaksALot
Sir SpeaksALot's picture

this job is freaking easy - first - use this money to buy physical gold, and then  - anounce a gold standard in China in 1 year from now.

Mon, 01/18/2016 - 15:45 | 7062929 4 wheel drift
4 wheel drift's picture

when will the kommies finally learn ?

complete idiots

Mon, 01/18/2016 - 15:47 | 7062946 Dr. Engali
Dr. Engali's picture

I don't know. Let's ask the president and the folks at the federal reserve.

Mon, 01/18/2016 - 15:53 | 7062979 Yen Cross
Yen Cross's picture

  Fuckin 'A... That guy looks like a Chinese Guido Maffia Don.

  That's a real "paragon of virtue", we've got there. lol

Mon, 01/18/2016 - 16:17 | 7063127 GoldSilverBitcoinBug
GoldSilverBitcoinBug's picture

China should copy USA or Japan: BUY all the stock at market with QE !!!

Mon, 01/18/2016 - 16:51 | 7063286 tarabel
tarabel's picture

 

 

Rat Numero Uno scuttles down the anchor chain and swims for shore before the SS Catastrophia sails with the tide.

Mon, 01/18/2016 - 18:08 | 7063700 besnook
besnook's picture

lol. in other words, only fixed markets work. they should have listened to the free market on wall street. commies.

Mon, 01/18/2016 - 18:15 | 7063738 Bunga Bunga
Bunga Bunga's picture

Yeah, chop off his head, then all will be good again.

Mon, 01/18/2016 - 18:51 | 7063896 Bopper09
Bopper09's picture

'You have failed me for the last time'

Mon, 01/18/2016 - 21:39 | 7064638 SirBarksAlot
SirBarksAlot's picture

I have to admire a man who can admit his mistakes pr shortcomings, if they were his to begin with, and resigns.

If our leaders had that much integrity we'd all be millionaires by now.

Mon, 01/18/2016 - 21:51 | 7064687 Youri Carma
Youri Carma's picture

China Equities Regulatory System Had Flaws, CSRC Chairman Says
16 January 2016, (Bloomberg News )
http://www.bloomberg.com/news/articles/2016-01-16/china-equities-regulatory-system-had-flaws-csrc-chairman-says

Yeah, it had some disadvantages … http://movieweb.com/movie/red-dragon/disadvantages/

Tue, 01/19/2016 - 10:45 | 7066101 Hazlitt
Hazlitt's picture

Either the Chinese markets really are "immature", which, given that the Chinese government had outright banned the market for decades and continues to mislead and suppress it, is entirely the fault of the same government because it destroyed previous knowledge of functioning markets and economics through its obviously wonderful vision for its people, or this regulator is just running his mouth because he can't (or refuses to admit) that markets, even suppressed and semi-capitalistic ones, invalidate his entire career and the destructive worldview it rests on.

Sooner or later, the markets also demonstrate to men how little they really know about what they imagine they can design, as Hayek once said. 

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