Securities experts from leading emerging markets outlined today at the IOSCO 2009 Conference (www.iosco2009.org) measures they have taken to bounce back from the damage caused by the market crisis. Among the topics that were addressed were the need for new partnerships between developed and developing markets, development of central liquidity pools, particular effects of the financial crisis in different regions and the role of emerging market economies in the global recovery process.
“What we realized here is that each country faces its own set of problems and while convergence of regulation is a good idea, I don’t know that it will work given the situations we face are really different,” said C.B. Bhave, Chairman, Securities and Exchange Board, India.
The panel was moderated by Guillermo Larrain, Chairman “Superintendencia de Valores y Seguros,” Chile, and included the participation of Dr. Hua Yu, Board Director and CEO, Morgan Stanley Huaxin Funds, China; Maria Helena Santana, Chairperson, Securities and Exchange Commission, Brazil; C.B. Bhave and Ester Levanon, CEO, Tel Aviv Stock Exchange.
According to Yu, the Chinese government, with a huge reserve of $2 trillion dollars, was able to initially insulate the Chinese financial markets from the effects of the downturn. In fact, he explained, while the markets were supported by this reserve, the economy itself was impacted significantly with high unemployment rate and a drop in export figures.
As a result of the crisis, the panelists noted the varying degrees of impact on their local currencies, with Santana explaining that following the collapse of Lehman Brothers in September, the Brazilian Real experienced a 50 percent drop in value over a period of 30 days. This drop-off followed a period of years of low volatility. According to Levanon, the Israeli shekel remained strong.
In his remarks, Bhave noted that the Indian market regulators have not placed any limitations on short selling as they believe that short selling is a good check and balance for determining the accuracy of share prices. Earlier in the day, William Brodsky, WFE chairman and chairman and chief executive of the Chicago Board Options Exchange, expressed similar sentiments. “Banning tools like short-selling does not protect investors, but rather creates further panic, Brodksy said, in reference to the temporary decision in the United States in October to ban short-selling, which resulted in the freeze of the convertible bond market.
“Exchanges and bourses should develop contingency plans to deal with crises. Exchanges need to have circuit breakers, such as protocols to halt trading if there is an extreme drop in prices, he said. Such circuit breakers should be known in advance, to avoid causing panic among investors by closing an exchange, he added.”
The conference was hosted in Tel Aviv by the Israel Securities Authority (ISA) and the Tel Aviv Stock Exchange (TASE).
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