The policy toolbox of 'revitalizing the capital market and boosting investor confidence' presents three major policies.
On August 27th, the China Securities Regulatory Commission stated that based on recent market conditions, the pace of IPO will be gradually tightened to promote dynamic balance between investment and financing; For large-scale refinancing of listed companies in the financial industry or other industries with large market capitalization, implement a pre communication mechanism, pay attention to the necessity of financing and the timing of issuance.
At the same time, further standardize the reduction of shares. If a listed company has a situation of breaking through or breaking through its net assets, or has not received cash dividends in the past three years, and the cumulative cash dividends are less than 30% of the average annual net profit in the past three years, the controlling shareholder or actual controller shall not reduce their holdings of the company's shares through the secondary market. The concerted action of controlling shareholders and actual controllers shall be carried out in accordance with the above requirements; If a listed company discloses that it has no controlling shareholder or actual controller, the first major shareholder and its actual controller shall comply with the above requirements.
The three major exchanges have also reduced the minimum margin ratio for investors to purchase securities through financing from 100% to 80%. This adjustment will be implemented after the market closes on September 8, 2023.
Periodic tightening of IPO rhythm and implementation of pre communication mechanism for large-scale refinancing
The China Securities Regulatory Commission has made regulatory arrangements for balancing and optimizing IPO and refinancing in the primary and secondary markets. Considering the current market situation, the Commission has improved the countercyclical adjustment mechanism in the primary and secondary markets, focusing on reasonably grasping the pace of IPO and refinancing.
Specifically, firstly, based on recent market conditions, the pace of IPO should be gradually tightened to promote dynamic balance between investment and financing.
The second is to implement a pre communication mechanism for large-scale refinancing of listed companies in the financial industry or other industries with large market capitalization, paying attention to the necessity of financing and the timing of issuance.
The third is to highlight the importance of supporting the superior and limiting the inferior. For listed companies that have experienced breakdowns, net losses, sustained losses in operating performance, and a high proportion of financial investments in refinancing, appropriate restrictions should be placed on their financing interval and scale.
The fourth is to guide listed companies to reasonably determine the scale of refinancing and strictly implement the requirements for financing intervals. The audit will focus on whether the funds raised in the previous round have been basically used up, and whether the projects raised in the previous round have achieved the expected benefits.
The fifth is to strictly require listed companies to invest their raised funds in their main business and strictly restrict diversified investment.
Sixth, the refinancing of real estate listed companies is not subject to restrictions on breakdowns, net assets, and losses.
In fact, the China Securities Regulatory Commission has been intentionally balancing investment and financing since August, and the pace of IPO and refinancing has changed. From the financing amount in August alone, as of August 27th, the IPO financing was about 50 billion yuan, a significant decrease from over 70 billion yuan in the same period last year; The amount of refinancing has decreased by 2/3 compared to the same period last year.
The relevant person in charge of the China Securities Regulatory Commission has clearly stated that to achieve sustainable development of the capital market, it is necessary to fully consider the dynamic and positive balance between investment and financing. Without the stable operation of the secondary market, the financing function of the primary market is difficult to effectively play. We always adhere to a scientific and reasonable approach to maintain the normalization of IPO and refinancing, while fully considering the affordability of the secondary market, strengthening the countercyclical regulation of the primary and secondary markets, and better promoting the coordinated and balanced development of the primary and secondary markets. The market will feel this change.
Standardize stock reduction behavior
Regarding the issue of major shareholder reduction that the market is concerned about, the China Securities Regulatory Commission has stated to further regulate the reduction behavior of relevant parties.
For listed companies that have failed to pay dividends or break their net assets, or have not received cash dividends in the past three years, or have accumulated cash dividends less than 30% of their average annual net profit in the past three years, the China Securities Regulatory Commission requires that controlling shareholders and actual controllers shall not reduce their holdings of the company's shares through the secondary market. The concerted action of controlling shareholders and actual controllers shall be carried out in accordance with the above requirements; If a listed company discloses that it has no controlling shareholder or actual controller, the first major shareholder and its actual controller shall comply with the above requirements.
At the same time, strict control should be exercised over the total amount of shareholding reduction by shareholders of other listed companies, guiding them to reasonably arrange the pace of shareholding reduction according to the market situation; Encourage controlling shareholders, actual controllers, and other shareholders to promise not to reduce their holdings or extend the share lockup period.
The China Securities Regulatory Commission (CSRC) stated that it is urgently revising the 'Several Provisions on the Reduction of Shares by Shareholders, Directors, Supervisors, and Senior Managers of Listed Companies', enhancing the effectiveness of the rules, refining relevant liability clauses, and increasing the crackdown on illegal reduction of shares.
Reduce the proportion of financing margin
In addition, with the approval of the China Securities Regulatory Commission, the Shanghai Stock Exchange, Shenzhen Stock Exchange, and Beijing Stock Exchange have issued notices revising the Implementation Rules for Margin Trading, reducing the minimum proportion of margin for investors to purchase securities through financing from 100% to 80%. This adjustment will be implemented after the market closes on September 8, 2023. This move is intended to promote the functionality of margin trading and securities lending business, and better meet the reasonable trading needs of investors.
In recent years, the margin trading and securities lending business has been operating steadily, the trading mechanism has been continuously optimized, the compliance risk control level of securities companies has been continuously improved, and investors' rational trading and risk prevention awareness have significantly increased. As of August 24, 2023, the balance of on-site margin trading and securities lending was 1567.8 billion yuan, with a relatively high margin ratio and controllable overall business risks. On the basis of overall controllable leverage risk, moderately relaxing the proportion of financing margin is conducive to promoting the function of margin trading and revitalizing existing funds.
The China Securities Regulatory Commission stated that this adjustment applies to both new opening contracts and existing contracts, and investors do not need to apply the new margin ratio to the balance contract. Securities companies can comprehensively evaluate the credit and performance status of different customers, and reasonably determine the proportion of financing margin for customers. Investors should continue to adhere to a rational investment philosophy and use margin trading tools reasonably based on their own risk tolerance. The China Securities Regulatory Commission will urge securities companies to effectively strengthen risk management, provide good investor services, and protect the legitimate rights and interests of investors.
Continuous efforts in a package of measures to activate the market
Since the Politburo meeting of the Central Committee explicitly proposed 'to activate the capital market and boost investor confidence', the China Securities Regulatory Commission has released a series of measures to activate market vitality.
Specifically, this includes promoting the comprehensive implementation of the reform of public fund fee rates and reducing the level of management fee rates; Relax the registration conditions for index funds; Reducing the payment ratio of settlement provisions, reducing the requirements for the number of stock fund declarations, researching the introduction of ETFs into the fixed price trading mechanism after the market, and introducing the GEM inquiry transfer and allocation reduction system, aiming to boost market confidence.
From the perspective of policy toolbox reserves, there will be a series of 'affordable' measures to be released in the future, such as strengthening dividend orientation, promoting the stability, sustained growth, and predictability of dividend distribution for listed companies, especially large market capitalization companies. Research and improve the systematic long-term dividend constraint mechanism. By guiding listed companies with stable operating cash flows to distribute mid-term dividends and strengthening information disclosure constraints on low dividend companies, investors can share the performance dividends of listed companies earlier and more. Revise the rules of the share repurchase system, relax relevant repurchase conditions, and support listed companies in carrying out share repurchase. Research on appropriately extending the trading hours of the A-share market and exchange bond market to better meet investment trading needs. Vigorously develop the Chinese characteristic index system and index based investment, and encourage various funds to enter the market through index based investment.
The relevant person in charge of the China Securities Regulatory Commission previously stated that it will accelerate the launch of a number of feasible and effective policy measures to stabilize expectations and boost confidence, while also focusing on the long-term, adhering to reform and opening up, coordinating the development of the stock, bond, and futures markets, and improving the basic system of the capital market. Strive to make breakthroughs in introducing fresh water, reducing transaction costs, and improving transaction smoothness. Adhere to improving market activity while maintaining overall market stability, strengthen cross departmental communication and policy coordination, and work together to form a strong force that enlivens the market and boosts confidence.