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The Shanghai Stock Exchange (SSE) is about to release the guidelines for dividend policies of listed companies while the regulatory authorities are studying the policies on shareholding increase and share repurchase.
"The transition of Chinese economy and the development of Chinese capital market have good prospects. The capital market promises great investment value and opportunities in economic transition," said SSE President Zhang Yujun at the "Symposium on Analysis of Securities Market Situation and Innovation of Securities Companies" yesterday.
According to Zhang, it is understandable that some market participants hold bearish and pessimistic attitudes towards the capital market as some indicators are not as well-performed as expected with the slackening pace of national economic growth in the recent period. However, participants in the capital market should consider the strategic opportunities and investment value of the capital market in an overall and far-sighted approach.
Firstly, the development speed of Chinese economy is guaranteed. As clearly planned by the CPC Central Committee and the State Council, the annual economic growth rate is 7% during the 12th Five-year Plan Period while the economic growth rate for this year is 7.5%. However, the annual economic growth rate for 2012 is sure to be higher in Zhang's opinion. Chinese economy has large demand and development space and it can guarantee a rapid speed of growth as the country remains at the stage of industrialization, marketization, internationalization and urbanization. Secondly, market participants need to pay close attention to economic performance besides economic growth rate. The basic thought of scientific outlook on development defined by the CPC Central Committee determines the long-term theme and strategic task of economic restructuring. In the process, the economic performance will be constantly improved. From the perspective of industry, market participants should not only notice the excess capacity in traditional industries, but also attach importance to the industries with products in short supply and the rising industries including those service industries such as science and technology, education, medical care, culture and creativity and food safety, the great consumption industry, and even many promising industries like the entertainment industry and the elder-oriented industry. Quite a few weak sectors of the national economy have large development space. Due to the imbalance among various industries, Chinese economic development still has a long way to go. Thirdly, market participants should observe the uneven development of different regions in China. Although southeastern coastal areas have seen a slowdown in economic growth, central and western areas have still kept a high growth rate due to a big gap among eastern, central and western areas in China. Rural areas have a large demand for investment and improvement to realize urbanization. Investors need to be good at looking for great investment opportunities especially in the capital market under the backdrop of the transition of Chinese economy.
Zhang stressed that market participants should be optimistic about the investment value of the capital market for the following reasons. Firstly, good prospects of Chinese economy and Chinese economic transition promise a bright future of the capital market. At present, the price-earnings ratios of SSE 50, 180 and 380 Indices are about 10, 11 and 20 respectively. Some critics have pointed out that this year is an unprecedented period of opportunities to invest in the market. Secondly, market participants can make a research on the behaviors of institutional investors. Although some domestic institutions hold bearish attitudes towards the Chinese market, some professional and sharp-sighted institutions for long-term investment follow closely the Chinese market and increase their investments. The quota for QFIIs has been constantly increased but it is far from enough to meet their demands. Foreign financial institutions express their strongest wish in the negotiation that China could further open its market. The domestic Social Security Fund is also far-sighted to increase the accounts. In a word, investors should make a research and survey on the behaviors of the professional and experienced institutional investors to consider the market in a far-sighted approach. Thirdly, as the global financial crisis has lasted for 5 years, the risks have been continuously released and the worst situation predicted. A saying goes that a prevailing bearish atmosphere implies the market bottom. Warren Buffet says that the essence of value investing lies in that one takes what others discard. Therefore, although no one knows exactly when the market bottom appears, it is around the bottom according to the historical data of the market. The analysts of the securities market need to see light and hope through difficulty.
Zhang pointed out that the SSE would further promote the reform and innovation of the market for elevating the investment value. Firstly, listed companies are the source of investment value. The SSE will further better the governance of listed companies, improve their quality, propel their standard operation and enhance their transparency. In addition, the SSE will rationalize the structure of listed companies by changing their undiversified structure. According to the development direction of the industries in our country, the SSE will encourage the enterprises in the agriculture industry, the food industry, the cultural and creative industry, the medical care industry and the self-independent sci-tech innovation industry to go public in a bid to enrich the industries of listed companies and the varieties of investment products in the market. Secondly, the SSE will cultivate investors, especially long-term investors, through product and business innovation. At present, it is taking the lead in the innovation of 12 products. The SSE also encourages fund companies to develop more products and meanwhile supports sunshine private trust, PE, VC, pension funds and other long-term capital to get into the market. Thirdly, the SSE will further encourage and support listed companies to formulate transparent, specific, stable and sustained dividend policies to improve the value of the blue chip market. Last year, 143 companies in the constituents of SSE 180 Index paid the cash dividend, whose planned-to-be-distributed cash amounted to RMB408.6 billion, accounting for 28% of the total net profit of the constituents of SSE 180 Index in 2011. Among them, 6 companies distributed the cash of more than RMB10 billion. The SSE is about to release the guidelines for dividend policies of listed companies for urging them to conduct reasonable dividend distribution. Fourthly, the SSE will further improve the environment of market policies. The regulatory authorities are earnestly studying the policies on shareholding increase and share repurchase as well as the rationalization of financing policies and other issues.
