Watchdog says securities companies' service must boost competitiveness

Any future regulation of the securities market must leave room for financial product innovation, without compromising on risk controls, a top official at the China Securities Regulatory Commission said on Wednesday.

"Innovation of services by securities companies should focus on improving competitiveness, based on market-oriented reforms," Zhuang Xinyi, vice-chairman of the securities watchdog, told a major financial conference in Beijing on Wednesday.

But any new innovations should be introduced with risk control firmly in mind, Zhuang added.

The annual Brokerage Innovation Conference is seen as a key indicator of regulatory reform in the securities industry.

Xiao Gang, who took over as the commission's chairman two months ago, was absent from this year's event.

He is yet to release any public comment, except a written statement on the CSRC website on May 2, which encouraged young practitioners in the securities industry to work hard to push forward innovative capital market reforms.

Chen Gongyan, chairman of the Securities Association of China, said that the current development level of the Chinese securities industry does not match the rest of the global market.

"Product innovation lags what is being demanded by the market, and current management systems within brokerages also hinder multi-level capital market development," Chen said.

One product manager from HuaAn Fund Management Co Ltd, who attended the conference on Wednesday, added: "There is no doubt that any breakthrough in the industry's development depends on the easing of policy restrictions, and there has been a rapid improvement in the past year since the former CSRC chairman, Guo Shuqing announced a series of major reforms last year." But he said there have been no sign yet of any new policies or aggressive changes.

The CSRC has announced 25 new policies since last year to ease controls on securities companies, particularly encouraging asset management services.

As a result, the total value of assets under management had increased to 2.83 trillion yuan ($459.4 billion) by the end of March, up from 280 billion yuan in December 2011, according to data from the SAC.

One of the most obvious changes has been to allow securities companies to participate in wealth management services, in direct competition with commercial banks, analysts say.

Other innovations include the opening up of the asset securitization business and the launch of securities short-selling pilot programs.

"We expected the influence of this year's conference will be much weaker than last year," the HuaAn fund manager added.

"Many representatives from securities companies I have talked to are not expecting too much from the event."

Premier Li Keqiang hosted a State Council meeting on Monday, and called for the setting up of a mechanism that would allow individuals to invest overseas, and protect the interests of investors.

Li also vowed to standardize and develop bond, stock and trust investment instruments.

In an article published in China Securities Journal on Wednesday, Wang Dongming, the chairman of CITIC Securities Co Ltd, called for efforts to expand securities companies, improve asset securitization, as well as facilitate innovation in wealth management and mergers and acquisitions in the sector.

Wang also suggested that securities companies launch commodities, foreign exchange and derivatives products, and that the regulatory commission allow brokerages to use financial derivatives tools in overseas market to hedge risks.

The benchmark Shanghai Composite Index closed up 10.73 points, or by 0.48 percent, at 2,246.3 - the fourth straight rise and the longest stretch of gains since March.