China pledges financial stability with markets bracing for selloff

Bloomberg

Chinese regulators unveiled a slew of measures to ensure stability of its $45 trillion financial system as the nation stepped up the fight against the spreading virus.
The China Banking and Insurance Regulatory Commission will “suitably extend grace period” for firms that have difficulty meeting end-2020 deadline to comply with new asset management rules, CBIRC vice chairman Cao Yu said in an interview published on Saturday. For insurers with ample solvency, the regulator will allow them to “appropriately raise their investment” in equities from current limit of 30% of assets, Cao said.
As concerns mount over economic impact from new coronavirus that infected over 11,700 people and killed 259 so far, Chinese policymakers including the central bank have ramped up efforts to shore up the financial system and capital markets which are bracing for a sell-off on Monday when markets re-open.
Citigroup said it expects China’s GDP growth to slow to 4.8% this quarter from 6.0% in Q4. It cut its full-year forecast for 2020 to 5.5% from 5.8%.

It’s natural for financial markets to fluctuate under risks but the impact of the epidemic will be “short-term and temporary,” said Cao, adding that the nation’s financial institutions and markets are more resilient after a long period of reform and opening, as well as the deleveraging campaign in recent years.
China is in a multi-year effort to crackdown on financial risks and contain growth in shadow banking. The most stringent polices include a requirement that all existing products comply with new asset management rules by the end of 2020. It’s getting increasingly difficult for banks to meet that deadline as the economy slows and defaults surge.
The CBIRC also called for lowering interest rates, cutting fees, and providing more loans in heavily stricken areas to support the nation’s fight against the virus outbreak.
In a separate joint statement issued by regulators led by the People’s Bank of China, listed companies and bond issuers that are not able to submit their 2019 annual report or 2020 first-quarter report on time as a result of the virus can apply for extensions from the stock exchanges.
Meanwhile, Li Chao, vice chairman of China’s securities regulator, urged brokerages and funds to guide investors to “rationally and objectively” evaluate the impact of the epidemic, and hold long-term and value-based investment philosophies. The watchdog has made “special arrangements” for this special period and it respects market rules and want to be flexible with the regulation.
China will implement faster processes to help companies most affected by the outbreak obtain financing, and the authorities will open an expedited channel to register private equity and venture capital funds that invest in medical equipment companies and vaccine research and development, Li said.