Michael Yang

1017800664@qq.com

UNLIKE Western stock markets, where institutional investors dominate, individuals account for 80 percent of transactions on China’s stock exchanges.

According to data from China Securities Depository and Clearing Ltd., China had 147 million retail investors as of last week, making the number of Chinese individual investors the largest in the world.

So, protecting the country’s legions of investors while also making efforts to create a fair and transparent capital market is an important task for China’s market regulators.

Regulators Saturday morning unveiled the latest regulations governing how to invest in the much-anticipated science and technology innovation board on the Shanghai Stock Exchange.

According to the regulations, individual investors who want to buy shares listed on the upcoming Nasdaq-style technology board have to have an asset of 500,000 yuan (US$74,627) and at least two years of experience in securities trading.

“This is conducive to ensure that the sci-tech board runs smoothly at the beginning, under the precondition of adequate market liquidity,” explained the China Securities Regulatory Commission when announcing the regulations.

To many, the threshold is rather high, as only 3 million investors are qualified for “chao” (or “stir-frying”) stocks listed on the new board. As the new board will scrap limits on price and debut gains, price swings are likely to be much wilder than those in the current market.

By excluding investors with limited experience or those with inadequate ability to take risks from making bets on a possibly volatile market, it is widely believed to be a good way to protect them.

Yet, for the majority of China’s retail investors, regulators’ latest move is appreciated but far from enough to protect their interests. Regulators still need to do more to ensure a fair and transparent stock market to better protect investors.

There’s insider trading, corporate governance, accounting malpractice, financial misstatements and share price manipulation, just to name a few areas which have long drawn wide attention from investors.

Over the years, regulators have stepped up efforts to protect investors’ interests by launching a multibillion-dollar investor protection fund, restricting financial institutions from selling risky products to inexperienced investors, cracking down on insider trading and market manipulation, and more.

The China Securities Regulatory Commission (CSRC) even did a good job of promoting value investment under the helm of Liu Shiyu, who stepped down after serving in the CSRC’s top post for three years, as many Chinese individual investors have been taking a gamble on fluctuations in share prices rather than making long-term investments.

These efforts have turned out to be effective to a large extent. But some market misbehaviors still beset the domestic market and dent investors’ interests.

To give an example, we can still see shares of some firms making unusual movements before important announcements are made, indicating that some insiders buy or sell shares with information they get in advance.

Now that China’s stock market is the world’s third largest and an increasing number of foreign investors are piling into Shanghai and Shenzhen-listed shares, regulators still need to further improve the way they oversee the stock market to lure more long-term value investors to stabilize China’s highly volatile market.