National Committee Member of the Chinese People's Political Consultative Conference (CPPCC) and also President of the Shanghai Stock Exchange (SSE) Zhu Congjiu spoke on the ongoing NPC and CPPCC Meetings in an exclusive interview with the "Shanghai Securities News".
National Committee Member of CPPCC and also SSE President Zhu Congjiu said in Beijing on March 6 that the development of national economy claims more for the capital market. The capital market should, through continuous improvement and development, assume the responsibility of supporting the rapid and sound development of the economy.
Main board market to be tapped
According to Zhu, as the pre-requisite in the capital market development, vigorous development of the main board market, with the focus of development of main board enterprises, mostly the backbone enterprises in the national economy, will contribute to the overall construction of a harmonious society. With arduous tasks in its future development, the SSE's principle work is to vigorously develop new main board enterprises for listing, which is also the objective requirement of the current economic development. The scale of the main board, with the market capitalization of more than RMB0.8 billion or less than 50% of the GDP, still has a large gap compared with 100% of other overseas markets. Therefore, the main board market still leaves leeway for more development. Meanwhile, China's rapid annual GDP increase means more room and tasks for the development of the main board market.
Zhu also stressed that exploration of the whole market's depth is a must for the development of the main board market. Recently, the impact of floating shares of "Da Fei" (i.e., the company's original holders of non-floating shares whose shareholding proportion is 5% to 10%) and "Xiao Fei" (i.e., the company's original holders of non-floating shares whose shareholding proportion is lower than 5%.) on the market has become a hot topic on the recent market. With the coming of all-floating era, the cash-out by original holders of non-floating shares brings some anxiety to the market. This actually indicates the inadequate market depth. If the market depth is enough, the market will be able to fully digest the bills of sales and large-volume sales order will not strike the market. To explore the market depth, it is necessary to accelerate the growth of institutional investors to have sufficient capital for market trading. So far, the total market capitalization of institutional investors accounts for more than 30% of the floating market capitalization. But compared with the total market capitalization, the proportion is relatively small. Therefore, we need to give priority to expanding the size of institutional investors.
Secondly, product mechanisms need to be continuously innovated. New products and mechanisms are needed to increase the market liquidity. Here, liquidity means the market's capacity in instant stock trading. As the current mechanisms for liquidity are inadequate, new products, including the covered warrants and margin trading and securities lending, need to be supplemented for its activity.
Multi-level capital market to be developed
Thirdly, we should promote the development of a multi-level capital market. Both the main board and the growth enterprise board need to be developed vigorously. The development of the growth enterprise board will help solve the problems of technology innovation enterprises. Moreover, it can attract and mobilize the capital with high market risk appetite to enterprises with both high potential and investment risks. Such capital is always on the market. All kinds of enterprises demand highly for capital in their innovative economy, for example, the Zhangjiang Hi-Tech Park.
According to Zhu, when building the multi-level capital market, another concern is the relationship between pooled and diversified trading modes. From the perspective of trading modes, the exchange is the most concentrated while the over-the-counter market is relatively diversified. We need to give attention to both concentration and diversity. According to the development mode recommended by Zhu, securities companies should conduct agency business of shares transfer for high-tech enterprises. Securities companies have capital sources while high-tech enterprises need to find the participants with real research capacity. Many unlisted enterprises, in an urge of capital for development, also need to solve such problems as capital exit. Therefore, the diversified off-floor market is needed for trading that cannot be realized in the pooled market.
Fourthly, investors should be given better orientation. The growing market calls for the upgrade of the whole system. Exchanges, securities companies, investors and medias all need to participate in the market. Thus, the system, contents and instructors for the investors' orientation should be put into effect.
Debentures market to be this year's development keystone
Zhu said that the development of the debentures market is a key issue in this year. Direct financing can't depend solely on the stock market. It requires the development of various products in the debentures market. The National Financial Work Conference this year has also pointed out that the debentures market should be actively developed. In terms of regulatory systems to push forward the development, Zhu holds that it is better to adopt a uniform supervision mode. With the supervision capacities, securities regulatory authorities are ideal to implement the uniform supervision. In addition, to strengthen the credit rating will be inevitable. From now on, debentures are not supposed to provide complete guarantees. Some might have some guarantees while some not complete ones. More modes should be introduced and realized through credit rating.
According to Zhu, the issuance and listing of debentures can absorb the experiences of past stock market. In the past, the debentures market trading is not adaptive to large-scale on-floor trading due to historical reasons. But now, stronger measures can be fully implemented since the current conditions are mature. Recently, the New York Stock Exchange (NYSE) has also publicly showed that it will fully develop the debentures market. Debentures' trading volume on the NYSE has decreased in recent years. Their significant move is to conduct the trading of corporate bonds issued by the companies listed on the NYSE on the very exchange, allowing the NYSE to have the capabilities of providing debenture-trading services. Another example is that the Euronext bought the debenture trading market. The SSE has conducted the debenture trading since the 1990s, and is now making preparation for the products of debentures by developing systems, building the market and arranging for appropriate trading mechanisms. According to Zhu, a set of new measures will be worked out to regulate the development of debentures. For example, it is expected to confirm the debenture interest rate by way of market pricing.
