According to the latest research report made by the Shanghai Stock Exchange (SSE), an array of major reforms launched by the China Securities Regulatory Commission (CSRC) since 2012 have got active responses from the market and witnessed the increasing policy effects, with the appeal of the market being enhanced as well. At present, domestic blue-chip companies have long-term investment values in light of historical data of the market valuation, listed companies' performances and dividend distributions at home and abroad, as well as investors' incomes from long-term shareholding.
The low market valuation
The SSE report presented an argumentation for the viewpoint above in the following 3 aspects. First, the historical data of the market valuation at home and abroad showed that China's securities market would have long-term investment values. When the SSE Composite Index closed at 2,066 points on October 26, 2012, the price-to-earnings ratio reached 11.16, lower than those of the previous two bottoms, namely, the price-to-earnings ratio of 16.52 when the SSE Composite Index closed at 998 on June 6, 2005 and that of 12.25 when the SSE Composite Index closed at 1,664 on October 28, 2008. Besides, the current P/B ratio of 1.5 on the SSE market is lower than 1.64 and 1.96 on June 6, 2005 and October 28, 2008, respectively. In horizontal contrast to major securities markets in other countries and regions at the same time, the current dynamic price-earnings ratio of the SSE Composite Index is 10.95, only higher than that (10.34) of the Hang Seng Index of Hong Kong. Moreover, the current dynamic P/B ratio of the SSE Composite Index is 1.5, a low figure in the world's markets.
The high profitability levels and dividend rates
Second, the profitability levels and dividend rates of listed companies indicate the current investment value of the Chinese securities market. It was pointed out in the report that according to the micro financial data of listed companies, in the middle of 2012, the average earning per share and the net asset value per share for A shares on the SSE respectively reached RMB0.16 and RMB3.53, 1.6 times and 1.3 times of those in the middle of 2005, while the return on equity (ROE) and the return on assets (ROA) increased by 38.8% and 1.9% compared with those in the middle of 2005. In the middle of 2012, a total of 590 listed companies had distributed dividends, higher than that (430) in the middle of 2005, while the total amount of dividend distribution in the middle of 2012 reached RMB529.78 billion, 8.5 times of that in the middle of 2005. Furthermore, the dividend rates of listed companies on the SSE market witnessed remarkable increases in recent years. In 2011, the dividend rates of the SSE 50 Index's constituents, the SSE 180 Index's constituents, and the SSE 380 Index's constituents respectively reached 2.46%, 1.91%, and 1.38%.
Buying at a low price for long-term investment: a good profitability model
Third, investors' incomes from long-term shareholding indicated that buying at a low price for long-term investment would be a good profitability model. It is held in the report that concerning investors' incomes from long-term investment on the A-share market, if investors could rationally buy when they see the obvious investment value of the market, instead of aimless purchase on the upswing and sale on the downswing, they might get better incomes and enjoy the investment values resulting from the growth of the real economy. The report also studied investors' complete incomes from long-term shareholding from 2003 to 2011 by taking the SSE 180 complete income indices, a representative of blue chips, as the constituents. The research showed that the accumulative yield of the SSE 180 complete income indices had reached 122.22% by the end of 2011, with the annualized rate of return up to 9.28%. Thus, the A-share market on the SSE market, especially the blue chips such as the SSE 50 and 180 Indices' constituents, had the long-term investment value obviously.
