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In an interview regarding the market's hot issues on March 7, the National Committee Member of the Chinese People's Political Consultative Conference and also Governor of the Shanghai Stock Exchange (SSE) Geng Liang said the SSE is confident and determined to promote the construction of the capital market in a standard and stable manner. This year, the SSE will further develop the blue-chip market, work on the establishment of the block trading information platform, propel the growth of the exchange's bond market as well as conduct R & D and product innovation of ETF at a deeper level and in a broader scope.
Develop Blue-chip Market, Promote Merger, Acquisition & Reorganization
According to Geng, only 8 companies' market capitalization on the SSE had exceeded RMB10 billion at the beginning of its establishment, and now the number is 131, among which 1 company's market capitalization has exceeded RMB1 trillion, 15 companies have their market capitalization between RMB100 billion and RMB1 trillion, while 115 companies between RMB10 billion and RMB100 billion.
In 2007, the SSE ranked No.6 in market capitalization, No.7 in trading volume and No.2 in raised capital amount among the world's major exchanges, and in 2008, its rankings were No.6, No.7 and No.8 in the aforesaid indicators. The RMB223.8 billion raised capital, which saw a drop last year, still made the second best record since its establishment.
Geng said that the framework of the SSE's blue-chip market has been confirmed, and it will stick to the goal of developing blue-chip market this year, with the following tasks to be done:
Firstly, to ensure trading safety and provide an effective, open and fair trading platform; secondly, to further develop the SSE's blue-chip market, with emphasis on promoting the to-be-listed companies' growth by merger and reorganization. According to Geng, the SSE has organized 9 teams to visit 53 listed companies in 18 provinces which have reorganization and merger intentions to conduct research and provide services since the fourth quarter of last year. Moreover, the SSE has specially established the Issuance and Listing Department and the Beijing Center for enhancing the merger and reorganization of to-be-listed companies. Geng said that, if necessary, the SSE will engage professional institutions to assist the listed companies with reorganization and merger intentions in researching and formulating plans.
To Establish a Block Trading Information Platform
According to Geng, the block trading market, though established for over 5 years, has been brought into full play in 2008 thanks to the policy of encouraging the shareholding lessening of big/small non-tradable stocks on the block trading market issued by the China Securities Regulatory Commission (CSRC) and the investors' growing recognition of the advantages of the block trading after several years' practice. Geng said that the block trading volume in 2008 has seen a year-on-year increase of tenfold while the transaction number has seen a year-on-year increase of twelvefold.
Geng described the launch of the block trading as an important reform of the SSE's trading methods, which still has great potential for development. The difficulty facing block trading is to find "counterpart", so the SSE is preparing to establish a block trading information platform to provide information for trading counterparts, and to further develop special floor business of the block trading.
To Launch SHSE-SZSE300 ETF Products
Geng stressed that stability will be maintained in pushing product innovation under the global financial crisis, and "product innovation and development will be in light of the market acceptance level". The products to be introduced by the SSE this year will be featured by "simple transaction, low cost and comprehensibility".
Geng said that the SSE will conduct research and product innovation in the depth and width of ETF products this year. Currently, it is working on the launch of SHSE-SZSE300 ETF products to pave the way for hedging and arbitrage trading by investors after the launch of stock index futures. Besides, it also plans to develop such products as sector ETF and bond ETF.
To Modify Trading Rules of Bond Market
Geng said that the development of the SSE's bond market is relatively slow, with the amount of bonds under custody on the exchange's bond market over RMB300 billion and the daily average trading volume at RMB12.1 billion, among which the spot trading volume is RMB2 billion and the repo trading volume RMB10 billion.
In January 2009, the CSRC and the China Banking Regulatory Commission jointly published relevant notice of listed commercial banks' return to the bond market of exchanges. "We fully support and welcome listed commercial banks to trade on the exchange's bond market," said Geng, "it was one of our priorities to develop the bond market this year."
Geng introduced the efforts made by the SSE regarding the aforesaid issue: firstly, to provide on-site services for 14 listed commercial banks one by one, assisting them to better understand the trading rules of the exchange's bond market; secondly, to modify the existing bond trading rules so that they are simpler and more adaptable to the trading practices of commercial banks; thirdly, to fully check the fixed income platform, ensuring the trading safety after commercial banks' return to the exchange's bond market.
Meanwhile, the SSE is actively promoting the back-end construction to gradually create the unified and interconnected information of related markets. Regarding the integration of the depository and clearing back-end of the exchange's bond market and that of the inter-banking bond market, Geng expected the back-end of China Securities Depository and Clearing Corporation Limited and that of China Government Securities Depository Trust & Clearing Co., Ltd. should be gradually integrated, the trusteeship transfer be accelerated and T+0 or T+1 be realized. "The task has been under way for years, and my proposal this year is to gradually formulate a unified and interconnected bond market by further accelerating the bond market's development and strengthening the connection between the two platforms", said Geng.
Confidence in a Sound and Stable Capital Market
Geng said the SSE is confident and determined to promote the construction of the capital market in a standard and stable manner despite of the changing economic situations both at home and abroad. The reasons are as follows:
Firstly, the fundamentals and long-term positive trend of China's economy remain the same, which is the basis and confidence source of the stable development of the capital market.
Secondly, China's capital market is generally in sound condition, which has a more solid basis after the equity division reform, the clearing and rectification of securities companies, the debt clearing of listed companies' major shareholders and other important reforms in recent years. The equity division reform solved the bottleneck problems affecting the sound and stable development of the capital market; the clearing and rectification of securities companies, with 33 unqualified securities dealers banned from the market, removed the industry risks; the debt clearing of listed companies' major shareholders led to a total of RMB49.5 billion capital returned by SSE-listed companies, who have become more capable of overcoming difficulties.
Thirdly, the CPC Central Committee and the State Council have formulated the general guideline of maintaining growth, expanding domestic demand and adjusting structure to promote the steady economic growth since last year. Concerning the specific issues in the capital market, the CSRC has also introduced a series of measures such as encouraging the shareholding lessening of big/small non-tradable stocks through the block trading platform, the repo of listed companies and the shareholding increase of listed companies' major shareholders. All these policies and measures have been brought into full play.
Fourthly, investors still have great passion in the capital market. According to Geng, the daily trading volume of the SSE of last year reached RMB73.3 billion in spite of the great adjustments in the two exchanges in Shanghai and Shenzhen. By March 3, 2009, the SSE had seen a daily trading volume of RMB101.9 billion, up 39% than that of last year.
