China Bank Regulator's Moves Unlikely To Spook Mkt: Analysts

     BEIJING (MNI) - The China Banking Regulatory Commission (CBRC) hinted last

week that it is not willing to interrupt markets and the real economy even

though it will continue to tighten regulations, which might offer some relief to

investors who had worried about another round of regulatory storms.

     The CBRC affirmed the achievements of a tighter regulatory environment

during the first half of the year, stating that the flow of money to the

financial sector has been "initially curbed," with interbank transactions and

entrusted investments -- both targets of the CBRC -- both slowing.

     Interbank assets and interbank liabilities contracted 5.6% and 2.3%,

respectively, as of the end of June compared with the end of last year, the

first contraction since 2010, according to the CBRC. In addition, outstanding

wealth management products of the banking sector decreased CNY1.9 trillion since

the regulatory crackdown began this year to CNY28.4 trillion at the end of July.

Entrusted investments also contracted around CNY530 billion during the same

period, the CBRC said.

     The CBRC also said 20 regulation documents will be revised or enacted this

year, but the new raft of regulations is not expected to spark a market panic as

it did in April, when several "heavyweight" regulatory documents came out over

the course of a few days, spooking the market.

     "The solving of existing problems is not likely to cause a second round of

financial panic, as maintaining financial safety is the foundation for future

regulatory works and most banks have corrected their problems at least to some

extent in line with requirements from regulators," Deng Haiqing, the chief

economist at Jiuzhou Securities, said in a report last week. 

     The CBRC said it will evaluate the potential effects of new regulations on

"the entire financial market" and "real economy"  and conduct pressure tests

when necessary to "lower the negative effect as much as possible."

     The CBRC also emphasized that it will coordinate with other regulators to

reduce misunderstandings and contradictions and communicate better with the

market by "sending policy signals in advance" to "stabilize market expectations

and reduce market fluctuations."

     The CBRC said one "very important reason" it targeted interbank

transactions, wealth management products and off-balance sheet business in its

crackdown this year was that the regulatory moves targeting the three areas had

"the least negative impact" on the real economy. The CBRC said it had reduced

the "idle cycling" of money and many "potential risks" in these businesses

through the crackdown.

     "The strength of regulatory policies will be highly related to the

endurance capacity and performance of the real economy," Sun Binbin and Tang

Xiaotian, analysts at Tianfeng Securities, said in a report on Monday. "So the

regulators will care more about economic performance and market reactions."

     "As a result, risks caused by regulations will be lower than in the past,"

Sun and Tang said.

--MNI Beijing Bureau; +86 10 85325998; email: he.wei@marketnews.com

--MNI Beijing Bureau; +86 (10) 8532-5998; email: vince.morkri@marketnews.com

[TOPICS: M$A$$$,M$Q$$$,MT$$$$]