Macro support a must for boosting A-share return prospect

More macroeconomic policy support should be a must for strengthening investor confidence in the A-share market as unstable expectations of economic prospects have hindered investors from adding stock market investment, experts said on Friday.

They commented after Yi Huiman, chairman of the China Securities Regulatory Commission, stressed on Thursday the need to strike a balance between financing and investment in the capital market amid some market discussions that continuous financing activity has weighed on market performance and eroded investors' return.

"In fact, the number and fundraising size of IPOs have already dropped as market sentiment soured," said Wang Jiyue, an independent investment banking analyst. "While measures could be taken to adjust the pace of IPO pace, the key to balancing financing and investment still lies in improving the entire macroeconomic condition."

A total of 162.8 billion yuan ($22.83 billion) was raised via IPOs in the A-share market in the first five months of the year, down by 40.6 percent from the same period of last year, according to market tracker Wind Info.

"A prominent problem weighing on the A-share market is the lack of fresh liquidity," said Charlie Zheng, chief economist at Samoyed Cloud Technology Group Holdings.

Easing monetary measures, such as cutting the reserve requirement ratio and interest rates, would help boost the A-share market by improving liquidity conditions and enhancing stock valuations, Zheng said.

An improving return prospect will attract more of the large amount of bank deposits flowing into A shares. This will, in turn, help further sustain a steady market performance, facilitate more financing activity and therefore create a more sustainable balance between investment and financing, Zheng said.

Li Daxiao, chief economist with Yingda Securities, said it is also important to improve relevant tax and accounting rules to incentivize more A-share investment by mid and long-term institutional investors.