Regulator says top leadership's guidance will boost investor confidence, reforms

Investment, financing and trading will be facilitated to invigorate the Chinese capital market so that it can contribute to the country's high-quality development, the China Securities Regulatory Commission said at a two-day mid-year work conference that ended on Tuesday.

On Monday, the Political Bureau of the Communist Party of China Central Committee stressed that more efforts are required to energize the capital market and boost investor confidence. This, CSRC officials said on Wednesday, suggests the top leadership has high expectations from the market.

To achieve the national goals, IPOs and refinancing should be normalized as part of the efforts to stabilize the capital market and expectations. A dynamic balance should be struck between the primary and secondary markets, said the country's top securities watchdog.

Tian Lihui, director of the Institute of Finance and Development at Nankai University, said the registration-based IPO mechanism is now adopted across the whole A-share market. And the new delisting mechanism will make the IPO process smoother and increase the investment value of the A-share market.

Structurally, China's capital market has improved this year, in terms of trading activity, especially in the primary and secondary markets for exchange traded funds and bonds. But trading activity in the secondary market for stocks and mutual fund products still needs to increase, said Tian.

The capital market's ability to serve China's major strategies should be increased in terms of both quality and efficiency, said the CSRC at the work conference. To that end, the STAR Market of the Shanghai bourse and the ChiNext in Shenzhen should be positioned well. Bonds issued to promote technological innovation should play a bigger role. More infrastructure real estate investment trusts or REITs focusing on consumption-end commercial projects should be rolled out, Tian suggested.

Agreed Zhang Wenlang, chief macroeconomic analyst of China International Capital Corp. As technological innovation has become increasingly important for China's economic restructuring, the capital market should evolve accordingly to better address the new development paradigm, Zhang said.

The ongoing higher-level reform and opening-up in the capital market should be further deepened, the CSRC said at the conference. Specifically, reform at the investment end should be steadily advanced.

Earlier this month, Shanghai Securities News reported that the CSRC is working to formulate an action plan for the reform at the investment end of the capital market, to achieve balanced development between investment and financing and direct more medium- to long-term capital to equity investment.

Meanwhile, the new filing mechanism for Chinese companies' overseas listings should be better managed, as part of the reform of the capital market, experts said.

The new mechanism took effect on March 31. Li Kang, assurance partner of professional services provider EY, said a strict filing timetable has been set under the mechanism. The normalization has helped raise Chinese companies' interest in overseas IPOs.

EY data showed 19 Chinese companies debuted on the US stock market in the first half of this year, netting $600 million in all. Without citing actual figures, Li said the number of overseas IPOs and fundraising activities has increased significantly compared to the same period last year, thanks to the new mechanism.

At the conference, the CSRC said it will stick to its supervisory obligations and better implement the three-year action plan to facilitate listed companies' high-quality development. The plan was rolled out late last year. Listed companies' normalized dividend issuance mechanism should be completed, it said.

The benchmark Shanghai Composite Index shed 0.26 percent on Wednesday while the Shenzhen Component Index closed 0.47 percent lower.