SOE profits, share value prioritized

By Shi Jing (China Daily) 09:41, January 31, 2024

Employees from a subsidiary of China Shipbuilding Industry Corp install clean-energy equipment in Nantong, Jiangsu province. [Photo/Xinhua]

While central regulators have placed more emphasis on state-owned enterprises' market value, the overall quality of such A-share companies should be further improved so that investors can benefit from their higher profitability and the country's high-quality development can be facilitated by their improved competitiveness, said experts.

During a work conference on Monday, the State-owned Assets Supervision and Administration Commission of the State Council said it will comprehensively promote the inclusion of market value management in the performance appraisal system for the executives at listed SOEs.

The detailed appraisal measures will be differentiated. While coordinating the commonly shared standards that can be quantified, individual differences — such as a company's positioning, industry characteristics and major undertakings — will also be considered among executive appraisals to reflect a company's value creation ability, said the regulatory body overseeing centrally administered SOEs.

By making the appraisal system more precise, regulated and effective, SOEs will be encouraged to further improve their core competitiveness and better shoulder their responsibilities in technological innovation, industry control and security, SASAC said.

This marks the second time SASAC has mentioned market value management within the past week.

While addressing a video conference on Monday, Chinese Vice-Premier He Lifeng stressed promoting the high-quality development of listed companies in an effort to boost market confidence, stabilize the capital market and advance high-quality economic development.

High-quality development of these firms can help enhance self-reliance and strength in science and technology, accelerate the building of a modern industrial system and shore up market confidence, he said.

Li Xunlei, chief economist of Zhongtai Securities, said listed companies' higher investment value is inseparable from their high-quality development. In this sense, corporate governance should be strengthened by emphasizing the responsibilities of major shareholders and board members. This will help enhance companies' operational stability.

Companies' investment value can be increased by a sound information disclosure mechanism, with which changes in company fundamentals are actively released. Such trials can first be made among SOEs to increase information disclosure frequency and content, Li suggested.

Analysts from CITIC Securities wrote in a note that more focus will be placed on the capital market's investment function while China advances capital market reforms. More efforts will be made to enhance investors' sense of gain. Therefore, companies should enhance their dividends' stability, continuity and predictability by improving their core operational competitiveness, they said.

Meanwhile, the financial market should provide high-quality services to the real economy by lowering financing costs and providing more seamless financing channels, they said.

Market confidence was rather suppressed earlier this year as some investors shorted restricted shares after refinancing them, thus dragging down the A-share indexes, said Yang Delong, chief economist of First Seafront Fund.

But as the China Securities Regulatory Commission said on Sunday that it would temporarily restrict the lending of all restricted shares, effective from Monday, the above loopholes in margin trading have been remedied and investor concerns have been addressed, he said.

The benchmark Shanghai Composite Index shed 1.83 percent on Tuesday to close at 2,830.53, while the Shenzhen Component Index finished 2.4 percent lower. But northbound capital, the money that overseas investors put into A shares, reported a net inflow of over 1.74 billion yuan ($240 million).

Experts from China International Capital Corp Ltd said that top regulators have recently launched a series of policies to further stabilize the economy, the capital market and investor confidence. Market sentiment has picked up and listed companies' stock buybacks have increased.

Positive messages from the policy and capital sides have been gradually increasing, providing recovery momentum for the A-share market. Therefore, there is no need to be pessimistic about medium-term performance, they added.

(Web editor: Tian Yi, Liang Jun)


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