Securities regulators’ emphasis on dividend payment and stricter implementation of delisting rules will by no means weigh on A-share small-caps or impair market performance, but rather will be conducive to the sustainable and sound development of the capital market by elevating companies’ quality, said officials and experts.
Responding to recent concerns over the guideline on delisting as well as exchanges’ revised listing rules, Guo Ruiming, head of the department of listed company supervision of the China Securities Regulatory Commission, the country’s top securities watchdog, said on Tuesday night that the concerns arise from a “pure misreading”.
The guideline and revised rules aim to eliminate “zombie companies” and “black sheep” from the A-share market, but are “not targeting the A-share small-caps”, said Guo.
The China Securities Regulatory Commission released a guideline on Friday stressing stricter implementation of the stock market delisting rules and dividend payments.
Also on Friday, the Shanghai and Shenzhen exchanges began to solicit public opinion on their revised listing rules, which have raised the bar for listing and further regulate delisting and stakeholders’ share reduction.
Prices of micro-cap companies spiked 9.68 percent on average on Wednesday, recovering most of Tuesday’s 10.55 percent loss. The benchmark Shanghai Composite Index closed 2.14 percent higher, and the Shenzhen Component Index was up 2.48 percent.
Zhao Wei, an analyst at Founder Securities, said that a large number of A-share micro- to small-caps promise much growth potential and are thus of much investment value, especially those focusing on technology advancement. The investment value of these companies has increased despite a 16-percent price slide since the beginning of April, he said.
Experts from SDIC Securities conceded that some less-competitive A-share micro-caps may be eliminated amid the regulators’ tighter grip on public companies’ quality. But that will lead to an overall leveling-up of asset quality in the Chinese capital market, they said, adding that micro- to small-cap companies specializing in niche markets and generating stable returns will be favored by the market.
Sun Jinju, vice-president of Kaiyuan Securities, said that the requirement for the dividend payment of listed companies will inject more confidence into the stock market and strengthen the concept of long-term investment.
Chen Li, chief economist at Chuancai Securities, said that as the China Securities Regulatory Commission further clarifies delisting rules in its latest guideline, the idea of rational investment will be more widespread, and quality companies will be able to get more reasonable valuations.
Public companies will attach greater importance to their prime operation and long-term planning, and investors’ interests will be better protected, and both of these factors will lead to the sound development of the stock market, Chen added.
Yang Delong, chief economist at First Seafront Fund, said that as incremental household savings came to 60 trillion yuan ($8.3 trillion) in China over the past three years, a large part of that will be directed to the capital market once opportunities arise.
A slow and long bullish A-share market driven by economic transformation can be expected, said Yang.