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Experts: Sustain sound market show

By SHI JING in Shanghai | CHINA DAILY | Updated: 2024-02-21 09:19

A view shows the China Securities Regulatory Commission in Beijing on March 10. [YU ZHIQIANG/FOR CHINA DAILY]

Continued efforts should be made to optimize IPOs, further improve A-share companies' quality and regulate major shareholders' conduct, in order to ensure sustained sound performance of the Chinese stock market, experts said after reviewing the proceedings of a series of forums held by the market regulator.

From Sunday to Monday, the China Securities Regulatory Commission, the country's top securities watchdog, led by its new chairman Wu Qing, stressed the importance of strengthening capital market supervision, preventing and alleviating systemic risks, and advancing the high-quality development of the capital market.

Efforts will be made to immediately address the concerns expressed by most of the market participants, said the CSRC.

The CSRC forums also solicited opinions from experts, scholars, individual investors, listed companies, securities firms, accounting firms, private equity firms and foreign financial services providers.

Forum participants suggested that A-share IPOs should be strictly controlled to ensure only good-quality companies get listed. They also said whole-process supervision over listed companies should be strengthened.

If IPOs are not regulated well and if rules of conduct for companies' promoters (founders) are not designed well, more problems may emerge in the subsequent refinancing or private placement activities, said Lin Yixiang, chairman of TX Investment Consulting.

Yang Delong, chief economist of First Seafront Fund, stressed that the registration-based IPO mechanism does not necessarily mean zero revision. Given the fact that individual investors make up most A-share investors at present, strict supervision over IPO applicants is needed and crackdown on fraudulent floats and financial frauds is crucial.

To avoid dilution of capital, the frequency of IPOs can be better controlled based on the secondary market's capability, he said.

As estimated by professional services provider Deloitte, the A-share market will likely see about 260 to 330 IPOs this year. Last year, IPOs fell by 27 percent to 310.

According to market tracker Wind Info, ever since the registration-based IPO mechanism started its experiment at the STAR Market of the Shanghai bourse five years ago, nearly 40 percent of the 1,000 IPO applications have been either withdrawn or rejected.

The CSRC forums' participants also suggested that a fundamental improvement in A-share companies' quality should be achieved. To that end, delisting of disqualified companies will help.

They applauded the CSRC's latest crackdown on financial frauds and insider trading by some A-share companies, saying that punishment for securities violations will help better protect the interests of retail investors and secure an open and fair market environment.

Meanwhile, on Tuesday, the benchmark Shanghai Composite Index gained 0.42 percent while the Shenzhen Component Index rose marginally. The combined trading value at the Shanghai and Shenzhen exchanges came in at 789.5 billion yuan ($109.7 billion).

Following Monday's surge, listed artificial intelligence companies in the A-share market reported an even stronger average daily price increase of almost 7 percent, attributable to the continuing buzz about AI-based text-to-video generator Sora of US firm OpenAI.

Another reason for the market upswing was that the People's Bank of China announced on Tuesday the over-five-year loan prime rate, on which lenders base their mortgage rates and long-term corporate loans, was lowered to 3.95 percent.

It is the first cut since June 2023 and also the biggest since the over-five-year LPR began to serve as an interest rate benchmark in 2019.

Ming Ming, chief economist at CITIC Securities, said that the lowered LPR is conducive to the bullish performance of the stock market, as this will lead to lower financing costs.

Chen Li, chief economist of Chuancai Securities, said that the collective stock repurchases of A-share companies will help boost market confidence and facilitate the construction of a mature investment mechanism where value investment will be the major investment style.

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