介绍:
China's securities regulator has suspended its new circuit breaker mechanism.
This comes after the Chinese stock market witnessed its shortest trading day on Thursday. I spoke to Cao Can the CEO of Shengya Capital.
Lincoln: Cao Can what do you think. What do Chinese regulators of the stock market, what are they going to do, what would you suggest they do?
Cao Can: The free market is definitely not perfect. The free market can go completely awry if left completely unregulated let’s bear in mind the regulations and that the regulators are imperfect too. When push comes to shove I’d rather that the free market has the final say. And let’s not forget that if we look at western history if you look at their stock market, for instance if you look at the Dow. The Dow begins in the 1980s is barely below 1000 and it ended above ten thousand so it’s a ten-fold increase. But still we have stock market crash of 1987 which scared a lot of investors away. If you look at famous investors like Warren Buffet and Berkshire Hathaway their stocks has declined at a 50% correction almost three times throughout history. That’s 50% correction. So in any healthy market you could see these wild swings it’s just the health of the market. Why? Because a lot of investors who are looking for capital gains are basically gambling in the stock market.
Cao Can: They would be scared away by these kind of price declines and if they are then they aren’t really suited for investing in the stock market they are just trying to increase profits and that is not [helpful for] the health of the market. So these wild swings can actually can actually squeeze the bubbles out of the market and if the regulators do want to restrict the level of swings in the market, the price swings, they still have a lot of measures at their disposal that are a lot more effective. For instance they can control the level of leverage a lot of these investors can use; so basically limit the margin trading and the amount of debt that they can use to acquire securities. So far this has not been implemented very well, because we still see a lot of leverage being implemented in the stock market right now from many investors. These kinds of swings are not really anything for concern for investors. Investors are sophisticated they basically voice their concerns about price declines and regulators feel that they have to take some action and cater to the concerns of the investors. When in reality these kinds of declines should be welcomed by value investors who are looking for bargains to buy.
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