Innovative tools enrich the 'long money' and support the stable development of the capital market
2024-09-25
On September 24, the main heads of the People's Bank of China and the CSRC announced a series of important measures to support the capital market at the press conference held by the State Council Information Office, including the creation of two structural monetary policy tools, further promoting the entry of medium and long-term funds into the market, and improving the investment value of listed companies. On the evening of that day, the China Securities Regulatory Commission released the "Opinions on Deepening the Market Reform of Mergers and Acquisitions of Listed Companies" and publicly solicited opinions on the "Regulatory Guidelines for Listed Companies No. 10- Market Value Management (Draft for Comments)", indicating that a series of policy measures are being accelerated. Industry experts say that the series of incremental measures to stabilize the market announced this time focus on investing, enriching the medium and long-term funds for equity investment, while also improving the quality and investment value of listed companies. With the gradual manifestation of policy effects, the inherent stability of the capital market is expected to be improved. To maintain the stability of China's capital market and boost investor confidence, the People's Bank of China, in consultation with the China Securities Regulatory Commission and the State Administration of Financial Regulation, has created two structural monetary policy tools to support the stable development of the capital market, based on international experience and the People's Bank of China's own past practices. This is the first time that the People's Bank of China has innovated structural monetary policy tools to support the capital market, "said Pan Gongsheng, the Governor of the People's Bank of China. Specifically, the first tool is the convenience of securities, funds, and insurance company swaps. Pan Gongsheng said that this work supports eligible securities, funds and insurance companies. These institutions are determined by the CSRC and the State Administration of Financial Supervision in accordance with certain rules. They can use their bonds, stock ETFs, Shanghai and Shenzhen 300 constituent shares and other assets as collateral to exchange treasury bond bonds, central bank bills and other highly liquid assets from the central bank. It is understood that the initial operation scale of the plan to exchange convenience is 500 billion yuan, and the scale can be expanded in the future depending on the situation. As long as it is done well, the first installment of 500 billion yuan can be increased by another 500 billion yuan, and even a third 500 billion yuan can be obtained. The funds obtained through this tool can only be used to invest in the stock market, "said Pan Gongsheng. The second tool is stock repurchase and refinancing. This tool guides commercial banks to provide loans to listed companies and major shareholders for the purpose of repurchasing and increasing their holdings of listed company stocks. Pan Gongsheng introduced that the central bank will issue re loans to commercial banks, with a funding support ratio of 100% and a re loan interest rate of 1.75%. The loan interest rate issued by commercial banks to customers is around 2.25%, and the initial amount is 300 billion yuan. If this tool is used well, an additional 300 billion yuan, or even a third 300 billion yuan, is possible Pan Gongsheng said that it will depend on the market situation and make some evaluations in the future. This tool is suitable for listed companies of different ownerships such as state-owned enterprises, private enterprises, and mixed ownership enterprises. The People's Bank of China will closely cooperate with the China Securities Regulatory Commission and the State Administration for Financial Regulation, and also require the cooperation of market institutions to jointly do this job well. The China Securities Journal reporter learned that with the strong support of relevant departments, the China Securities Regulatory Commission and other relevant departments have formulated the "Guiding Opinions on Promoting the Market Entry of Medium and Long term Funds", which will be issued soon. Specific measures include vigorously developing equity public funds, improving the institutional environment for "long-term investment", and continuously improving the capital market ecology. At present, China's economy is in a critical period of high-quality development. With the continuous increase in demand for residents' asset allocation, wealth management, and pension investment, the demand for medium - and long-term capital to increase equity investment is constantly increasing Tian Lihui, Dean of the Institute of Financial Development at Nankai University, said. In recent years, the China Securities Regulatory Commission has vigorously promoted the development of equity public funds and, together with relevant parties, has continued to promote the entry of medium and long-term funds into the market, achieving some phased results. According to Wu Qing, Chairman of the China Securities Regulatory Commission, as of the end of August this year, professional institutional investors such as equity public funds, insurance funds, and various pension funds held a total of nearly 15 trillion yuan in A-share market value, more than doubling from the beginning of 2019, and accounting for 22.2% of A-share market value, up from 17%. Lian Ping, President and Chief Economist of Guangkai Chief Industry Research Institute, believes that the capital market should further increase its openness, adjust the proportion of foreign shareholding, lower the threshold for foreign investment to establish financial investment companies in China, and attract more foreign investment into the market. By optimizing the investor structure and enriching investment products, we aim to promote the entry of long-term overseas funds into the market. Wu Qing revealed that the China Securities Regulatory Commission will work with relevant parties to further support the arrangements of Central Huijin Company to increase its holdings and expand its investment scope, and promote the investment of various medium and long-term funds, including Central Huijin Company, in the stock market. The China Securities Regulatory Commission will actively support various types of funds, including insurance funds, to increase their market entry efforts and provide a better policy environment; Further enhance the strategic reserve force and work together to promote the stable and healthy development of the capital market. Further enhancing the investment value of listed companies "Listed companies are the foundation of the market." Wu Qing stated that the China Securities Regulatory Commission actively supports listed companies in improving their operational efficiency and profitability, and the State owned Assets Supervision and Administration Commission of the State Council is also increasing its assessment of the market value management of central state-owned listed companies in accordance with the "one enterprise, one strategy" policy. Listed companies must strive to improve the transparency of information disclosure and the standardization of corporate governance, strengthen communication with investors, and comprehensively use methods such as dividends and repurchases to repay investors. Since the beginning of this year, more than 95% of listed companies have held performance briefings, 663 have announced interim dividends totaling 533.7 billion yuan, and over 1500 companies have actually implemented share repurchases totaling over 100 billion yuan. Wu Qing stated that to improve the quality of listed companies and enhance their investment value, listed companies must truly shoulder their responsibilities. One is to require the board of directors to attach great importance to investor protection and returns, and to strengthen the foundation of market value management by improving management level, enhancing profitability, and improving core competitiveness. The second requirement is for listed companies to actively use market value management tools such as mergers and acquisitions, equity incentives, and major shareholder increases to enhance investment value. Thirdly, it is required that listed companies establish a normalized repurchase mechanism arrangement, and encourage companies with conditions to plan and reserve funds in advance. The fourth requirement is for long-term net worth companies to develop value enhancement plans, evaluate implementation effects, and publicly disclose them to form market constraints. The fifth requirement is for major index component companies to take responsibility, establish market value management systems, clarify responsibilities and response measures, and regularly disclose their implementation status. What needs to be emphasized here is to strengthen market value management, but at the same time, listed companies and related parties must raise compliance awareness and cannot engage in illegal and irregular activities such as market manipulation and insider trading under the guise of market value management Wu Qing said. (New Society)
Edit：NiChengRan Responsible editor：LiaoXin
Source：China Securities Journal
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