Stabilizing Stock Market: 'Punch' Accelerates, Enhances Market Stability
On September 24th, the "One Line, One Bureau, One Association" announced a package of policy measures at the press conference on financial support for high-quality economic development held by the State Council's Information Office. Over the past month, multiple measures have been successively implemented. Among them, the "M&A Six Articles," guidelines to promote medium and long-term capital entering the market, market value management guidelines, and two monetary policy tools created by the central bank, among other stable stock market policies, have accelerated their implementation, boosting market confidence and improving the expectations of domestic and foreign investors.
In the past month, both domestic and foreign capital have continued to flow in, and the trading activity of the A-share market has significantly increased. According to Wind data statistics, as of October 23rd, the average daily trading volume of A-shares in the past month was 163.012 billion shares, a sequential increase of 156.18%, and the average daily transaction amount was 1.89 trillion yuan, a sequential increase of 231.69%.
Experts interviewed by journalists believe that in terms of improving the quality and investment value of listed companies, regulatory authorities will issue market value management guidelines and promote their implementation to enhance the investment value of listed companies; they will guide listed companies to carry out high-quality mergers and acquisitions (M&A) around industrial transformation and upgrading, and seek a second growth curve. In terms of promoting long-term capital entering the market, they will promote the implementation of a long-term assessment mechanism for insurance funds, various pension funds, and other medium and long-term capital with a cycle of more than three years, encourage enterprise annuity funds to explore different types of differentiated investments based on the different ages and risk preferences of holders; expand the pilot reform of long-term investment of insurance funds, promote long-term incremental capital entering the market, and enhance the market's inherent stability.
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The "M&A Six Articles" stimulate market enthusiasm, and large-scale reorganization plans follow one after another. On September 24th, the China Securities Regulatory Commission (CSRC) issued the "Opinions on Deepening the Reform of the M&A Market of Listed Companies" (i.e., "M&A Six Articles"), further improving regulatory tolerance, enhancing the transaction efficiency of the reorganization market, encouraging listed companies to strengthen industrial integration, and supporting listed companies to transform and upgrade in the direction of new quality productive forces.
According to Tonghuashun iFinD data statistics, as of October 24th, within a month, 21 A-share companies announced significant asset reorganization plans, and most of the M&A targets were enterprises in strategic emerging industries. In terms of payment tools, Fulude and Jingfeng Mingyuan, two companies, also introduced targeted convertible bonds.
"The 'M&A Six Articles' effectively stimulated market M&A enthusiasm, and the number of significant asset reorganization cases of listed companies has significantly increased," said Yang Chao, the chief strategist of Galaxy Securities, to the Securities Daily reporter. In the recent surge of M&A and reorganization cases, cross-industry M&A cases have become a major highlight, which helps enterprises break through industry barriers, obtain new technologies, new markets, and new resources, thereby enhancing core competitiveness and sustainable development capabilities.
Yang Chao believes that in order to further improve or clarify the policy effects, the following aspects need to be paid attention to: First, ensure the quality of M&A and reorganization, avoid blind cross-industry and speculation, and maintain market order and investor interests; second, strengthen the supervision and evaluation of the integration effects of enterprises after M&A and reorganization to ensure the realization of the "1+1＞2" synergistic effect; third, further clarify the standards or details of cross-industry M&A to guide enterprises to carry out M&A around the needs of industrial transformation and upgrading, and seek a second growth curve; finally, improve the service level of intermediary institutions, give full play to their role in transaction matching and professional services, and improve the quality and efficiency of M&A and reorganization.
The promulgation of the "Market Value Management Guidelines" is expected, and the ability to reward investors will be enhanced. On September 24th, the CSRC publicly solicited opinions on the "Supervision Guidelines for Listed Companies No. 10 - Market Value Management (Draft for Comments)" (hereinafter referred to as the "Market Value Management Guidelines"), with a deadline for feedback on October 24th. As the solicitation of opinions ends, the CSRC will issue and implement it after revision and improvement.The "Market Value Management Guidelines" encourage listed companies to legally and compliantly use mergers and acquisitions, equity incentives, cash dividends, investor relations management, information disclosure, share buybacks, and other methods to promote the enhancement of investment value of listed companies; and clarify that companies that are major components of main indices should formulate and disclose a market value management system for listed companies; it requires companies that have been trading below their net asset value for a long time to formulate and disclose a plan to enhance the valuation of listed companies.
Yang Chao stated that in the future, with the implementation of the "Market Value Management Guidelines," the market will place greater emphasis on the long-term value of companies and returns to investors, reducing short-term speculative behavior, thereby promoting the market to develop in a more mature and stable direction. This will help attract more long-term capital inflow, laying a solid foundation for the high-quality development of the market.
"The market value management of A-shares has officially entered a new stage of policy support and standardized development," said Li Qiusuo, Chief Analyst of Domestic Strategy at the Research Department of CICC. The "Market Value Management Guidelines" clarify the direction for listed companies to carry out market value management, which is conducive to improving the quality and investment value of listed companies, enhancing the ability of the capital market to reward investors, and increasing the investment appeal of A-shares.
Two innovative monetary policy tools provide strong liquidity for the market.
On October 18, the People's Bank of China officially launched the Securities, Fund, and Insurance Company Swap Facility (SFISF) operations; on the same day, the People's Bank of China, together with the State Financial Regulatory Administration and the China Securities Regulatory Commission, issued the "Notice on the Establishment of Stock Repurchase and Increase in Holdings Re-lending Matters," announcing the establishment of re-lending for stock repurchase and increase in holdings.
On October 20, the first batch of 23 listed companies announced that the company or controlling shareholders have signed loan agreements or obtained loan commitment letters with banks, and will use the loan funds for repurchase or increase in holdings. According to the reporter's collation, as of October 24, 35 companies have disclosed repurchase and increase in holdings loan announcements, involving a total amount of funds exceeding 12 billion yuan.
On October 21, the central bank carried out the first swap facility operation, with an operation amount of 50 billion yuan, and 20 institutions participated in the bidding. Subsequently, CICC and Guotai Junan quickly implemented related transactions, completing the first stock increase transaction.
Li Qiusuo said that the swap facility and repurchase and increase in holdings re-lending are the first structural monetary policy tools created by the central bank to support the capital market, releasing a positive signal that the central bank will provide liquidity to the capital market when necessary, which is conducive to boosting investor confidence. The funds obtained from the swap facility can only be invested in the stock market; the increase in holdings re-lending guides banks to provide loans to support listed companies and major shareholders to repurchase and increase their holdings of stocks. Both tools are beneficial for improving market liquidity and also for improving the profitability quality of listed companies.
Promoting "long money" to enter the market continuously, the market's inherent stability will be enhanced.
On September 26, the Central Financial Office and the China Securities Regulatory Commission jointly issued the "Guiding Opinions on Promoting Medium and Long-term Funds into the Market" (hereinafter referred to as the "Guiding Opinions"), to build and cultivate a capital market ecosystem that encourages long-term investment, vigorously develop equity-based public funds, focus on improving various supporting policies and systems for medium and long-term funds to enter the market, and promote a significant increase in the scale and proportion of medium and long-term funds invested.Recently, the CSI A500 Index and its linked products have been highly sought after in the market. The first batch of 10 CSI A500 ETFs were officially filed and approved within just one day, and they were listed on October 15th. Wind data shows that as of October 23rd, the shares of the first batch of 10 CSI A500 ETFs have all increased compared to their listing, with the shares of Guotai CSI A500 ETF reaching 10.685 billion shares. Currently, several CSI A500 offshore index funds have also been approved and are about to go on sale.
At the 2024 Financial Street Forum Annual Conference, China Securities Regulatory Commission (CSRC) Chairman Wu Qing proposed: "We need to accelerate the implementation of guidelines for medium and long-term capital entering the market, vigorously develop equity public funds, implement differentiated policies to unblock the pain points and difficulties in medium and long-term capital entering the market, and build a policy system that supports 'long money for long-term investment'."
Yang Chao believes that the key to promoting the implementation of the "Guidance" includes optimizing the registration of equity fund products, promoting the innovation of broad-based ETFs and other index products, and timely launching more ETF funds including those for small and medium-sized plates such as the ChiNext and STAR Market; promoting the public fund industry to steadily reduce comprehensive fees to better benefit investors; supporting "long money" investments from social security and insurance funds, fully implementing long-term assessments of more than three years, and policies will encourage enterprise annuity funds to explore different types of differentiated investments based on the different ages and risk preferences of the holders.
"Different types of long-term capital may play different roles in influencing the market's capital, among which the pace and scale of public and private funds entering the market are related to market conditions, and the role of some of their products as long-term capital may depend on the optimization of future investment research capabilities and investment philosophy; insurance funds, social security funds, and other typical long-term capital are expected to continue to steadily increase their investment scale and proportion in A-shares under policy guidance," said Li Qiusuo.
In addition, at a press conference held by the State Council Information Office, Li Yunze, Director of the National Financial Regulatory Administration, proposed to expand the reform pilot of long-term investment of insurance funds. On the basis of the first insurance private equity securities fund, support other qualified insurance institutions to set up private equity investment funds, and further increase the investment in the capital market.
Industry insiders say that expanding the pilot scope of long-term investment of insurance funds and exploring the launch of more long-term investment models for insurance funds are conducive to supporting insurance funds to overcome obstacles to entering the market in terms of performance assessment, accounting, and solvency regulation. It promotes the increase of the scale and proportion of equity investment by insurance funds, enhances the stability of investment behavior, and increases long-term returns.