Market regulations aim at 'long-term stability'

By Shi Jing (Chinadaily.com.cn) 08:47, January 26, 2024

While investors' confidence has been boosted as regulators put higher requirements on state-owned enterprises' market value management, market regulation should be further refined and improved to protect the interests of smaller investors, which is crucial to the long-term stability and healthy development of China's stock market, industry experts said.

Driven by the average 7.08 percent price spike of A-share SOEs on Thursday, the A-share market rebounded strongly with the benchmark Shanghai Composite Index surging 3.03 percent to return to the 2900-point level. The Shenzhen Component Index also jumped 2 percent and the technology-focused ChiNext in Shenzhen closed 1.45 percent higher.

Trading was more active on Thursday. The combined trading value on the Shanghai and Shenzhen exchanges rose 17 percent from the previous trading day to approach 900 billion yuan ($126 billion).

Thursday's rally came a day after the state-owned Assets Supervision and Administration Commission of the State Council said that efforts will be made to study the inclusion of market value management in the performance appraisal of executives at listed SOEs, to get these executives to attach greater importance to companies' stock market performance.

The SOEs should use market-oriented means, such as increasing holdings and repurchases in a timely manner, to inject confidence, stabilize expectations and increase cash dividends to give better returns to investors, according to the SASAC.

Yang Delong, chief economist of First Seafront Fund, said that the SASAC's latest announcement serves as a major incentive for the A-share market, elevating market sentiment to a large extent.

Given the large market capitalization of listed SOEs, their bullish performance will serve as important upward momentum for indexes. Investors will have higher expectations for the future market performance of the SOEs, he said.

Xu Yugao, secretary of the board of China National Offshore Oil Corporation, said that the SASAC's new measure will guide listed SOEs to improve their market value management system, enhancing the companies' intrinsic value and market value at the same time.

Huang Wensheng, vice-president of China Petrochemical Corporation, said that it will maintain the continuity and stability of its dividend policy while developing its prime business. It will also improve the quality of information disclosure based on investors' needs.

China Communications Construction Company Limited introduced an equity incentive plan in 2023 as one way to better manage its market value, said the company's board secretary Zhou Changjiang.

While strategic emerging industries account for 40 percent of the 383 A-share listed SOEs, continued efforts should be made to nurture more industry leaders and improve corporate governance as ways to further improve SOEs' quality, said Xie Xiaobing, head of SASAC's bureau of property right management.

Liu Xingguo, a senior researcher from the China Enterprise Confederation, said that the undergoing industrial upgrading of SOEs combined with their improved market value management will stabilize companies' share prices, which is conducive to the overall stability of the capital market.

While public companies' quality evaluation systems should be optimized by placing more emphasis on returns to investors, companies committing major violations of the law or providing no investment value should be eliminated at a faster pace to further consolidate and normalize the delisting mechanism, said Wang Jianjun, vice-chairman of the China Securities Regulatory Commission.

Chen Li, chief economist from Chuancai Securities, stressed that supervision should not be relaxed as it is the foundation of a secure and stable market. Only a regulated and transparent market environment can enhance investors' confidence while improving public companies' quality and investment value.

(Web editor: Tian Yi, Liang Jun)


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