Hu Ruyin: What Is The Strategic Goal Of China's Capital Market?

The Eleventh China securities market annual meeting, entitled "new trend, new power and new ecosystem", was opened in Beijing. In his speech, Hu Ruyin, chief economist of the Shanghai stock exchange, mentioned that the Chinese market is a big but not strong, low core professional ability, and has a strong savage growth and government intervention in the childish market, which is far behind the basic needs of the real economy and the whole society.

Hu Ruyin also said that many companies do not support the fundamentals of listed companies. In addition, many securities analysts are flickering, without rigorous professional analysis.

In Hu Ruyin's view, the Chinese market is faced with two destinies: a primitive and speculative China and prudent, professional and rational investment in China. Developing prudently, professionally and rationally investing China needs comprehensive spanformation and upgrading of the capital market.

The following is the full text of Hu Ruyin's speech:

Good morning, everyone! I want to talk about the key issues to be solved in the reform and development of capital market.

I have a theoretical framework. This theoretical framework is a pyramidal structure. The bottom should have an appropriate system and policy culture environment, and the whole social resource mismatch should be minimized. Second, there is an efficient real economy, and industrial investment has sustained high returns. Third, financial investment continues to pay high returns, for example, the renminbi will become an international strong currency and become the global reserve currency.

In the competition of global powers, I summarize who can provide the highest rate of financial investment in the world, and whose financial center can become the world's leading financial centre. Second, who has the best real sector of the economy and the highest average return on investment in real economy will continue to provide the world's highest rate of return on financial investment. Third, whose market distortion is the smallest, and the social cultural system political environment is most conducive to the efficient allocation and utilization of social resources. Who has the best corporate sector entity economy in the world, including the group of listed companies, can have the highest rate of return of the real economy in the world. Fourth, who can provide the highest rate of return on financial investment in the world, and its monetary and financial assets will be the most attractive in the world.

There are three principles for the construction of an economic and financial power. We should not short-sighted and focus on the long term. We should not blindly cater to the short-sighted demands, and short-sighted short-term vested interests and sacrifice the healthy and long-term development of the economy. Second, practice internal skills return to the root, do not do superficial work, can not just say no practice, can not end. Third, professionalism and rationalism, the modern market economy is a specialized division of labor economy. Its basic logic is specialization. Every field must be specialized from the real economy, the management of the company, the strategic management of the company, the investment from the company to the operation of the capital market, the operation of the government, and the supervision of the market.

The trilogy of the United States and Great Britain in building a powerful financial power: first, to build suitable culture, system, policy and market environment, to effectively deploy and utilize resources in the whole society, to build excellent corporate departments and industrial organizations, and to build a solid solid economic foundation for colleges and universities. Second, we must establish a deep and wide range of efficient financial markets, including the capital market and derivatives market, while strengthening domestic financial sectors, including the securities industry. Third, let their financial institutions internationalize and let their financial institutions go out of doors and be invincible.

The United States has been very successful in the three step strategy, and has brought about two leading global positive results in the capital market. First, the total number of Listed Companies in the United States over the past few decades has exceeded 75% of its financing structure from the internal operation process, resulting from the continued high investment returns, and external equity financing accounted for only 5% to 6%. Second, over the past two hundred years, the outstanding profitability of us listed companies is the annual average return of 5% to 6% after excluding inflation. The so-called Siegel constant is not bragging, nor bubble blowing.

The strategic goal of the development of China's capital market in the future will be summed up as four words: "enriching the people and powerful country", developing into a healthy, orderly, efficient, perfect, outstanding and global leading capital market, realizing the overall spanformation and upgrading of the whole economy and society, and building a leading innovative country in the world. Avoiding the fall into the middle-income trap, we must develop a very perfect direct financing system.

Therefore, it is necessary to strongly support China to become a powerful country in the global economic and financial innovation and wealth production. The position, role and function of the capital market in the whole society will need continuous improvement, continuous improvement and continuous expansion.

As far as the size of the stock spot market is concerned, the market value of China's listed companies has ranked second in the world, but the quality and efficiency of the market operation are very backward. The market is large but not strong and immature. It is still a immature market with low core professional competence and strong barbarous growth and government intervention. We have been saying that this is a new spanitional market. For nearly 20 years, we should say that until now, we are still a new spanitional market with strong color. The risk of this market fluctuation is high and its long-term investment return is low. Its function is neither perfect nor far behind the basic needs of the real economy and the whole society.

After the establishment of the Shanghai stock exchange, the volatility of the Shanghai Composite Index and the Hang Seng Index and the N225 index of the S & P 500 and Hongkong have fluctuated too much. The high volatility is the risk. The volatility is the risk. The comparison of the three indices in the recent ten years shows that the risk of the market is too high and its efficiency is too low. We are still a weak and effective market, and once entered a semi strong and effective market. Now it is back, not even a strong and effective market. The quality and efficiency of the market are all very problematic.

What are the problems of the stock market going up and down? What are the problems? I can summarize the weakness of the key ability building in the stock market, the three key abilities, the professional ability, the value creation and the wealth creation ability, and the two is the ability of value discovery, that is, the correct pricing ability, and the third ability to control systemic risk.

For example, the main driving force of the stock market has been driven by leveraged driving. I call it Bo herd investment driven herding, valuation distortions and wayward stock market prosperity. Five stir fry, stir fry, stir fry, stir fry, stir fry, stir fry, frantically, crazie, blind, and speculate. The stock price is too high. New shares After the listing, the proportion of small and medium-sized shares and large share prices is much higher than that of any other country in the world.

After excluding commercial banks, we can see that at the time of the high stock market, its P / E ratio is close to the very high P / E ratio at 6124. In addition, the correlation between our corporate earnings and the Shanghai composite index is negative. Without the basic support of the listed companies, many of our securities analysts are big flickers, and there is no very rigorous professional analysis. Therefore, we are faced with the fate of the two China, a primitive and speculative China and prudent, professional and rational investment in China. To build a financial power, we must develop a prudent, professional and rational investment in China. Therefore, we need the comprehensive spanformation and upgrading of the capital market.

The capital market is based on direct financing, rationally allocate resources and make use of social and economic resources to serve the real economy, and has a professional market system with instrumental value.

The capital market has the right pricing function, the pricing is wrong and all the functions are finished, so the correct price signal is the premise for the market economy to rationally allocate resources and the health of the capital market. capital market Even more so, to judge whether a market is functional or not is not the first sign of an index, but whether the valuation is reasonable or not. The valuation is unreasonable. The higher the value of inflation is, the faster the bubble will go up. The more reasonable the market is, the better the incentive system can be, so that all people, including all the listed companies, can concentrate on making the company better, rather than thinking about reducing its holdings.

In a clearly priced capital market, the price is higher than the intrinsic value. The more the stock spanaction is away from value investment and rational investment, the more speculative and colorful the market is. The closer the market is to irrational prosperity, the greater the negative impact on the whole society will be. The whole society will pay a heavy price when the capital market is completely open to the outside world.

Most Investor All of them are entering the stock market with the mentality of getting rich overnight, which means that the stock market's culture is out of order, and its operation mode is out of order. What problems need to be solved in the future? To construct a suitable macroeconomic environment, to make the macro-economy have a solid entity economy, to put the micro economic efficiency in the first place, and the macro stimulation with inefficiency on the micro level is bigger. The greater the social loss is, the more unsustainable it is, and the higher the risk it brings.

Second, focus on improving the continuous return rate of listed companies and the real economy. Now the rate of return of listed companies is less than 5%, and bank deposits are close to 7%. As a balance sheet, it can be seen as a profit statement, a cash flow statement, no money, no EVI and no net capital value. This problem must be solved. If this problem is not solved, China's capital market can not become the world's leading capital market, because the quality of listed companies is not good enough.

How to proceed from the present situation of investors based on individual investors, effectively promote the capacity building of capital market, improve the value discovery ability of capital market, ensure the appropriateness of capital market pricing, ensure market participation four, do not abuse the market mechanism, and cause the market to grow wild and let go.

Third, how to improve the operation mechanism and ecosystem of the derivatives market, and achieve the balance between the three types of spanactions, including hedging, hedging and investment.

Fourth, straighten out the relationship between the government and the market, push forward the regulatory reform, avoid the conflict of multiple decision making by regulators, build a centralized, unified and efficient functional supervision mechanism and effective law enforcement mechanism to ensure the appropriateness of government, regulators, media and market participants, and the duty of all parties to return.

I will talk about it until now. Thank you!