Innovation Leads Reform And Accompanying: "2019 China Capital Market Development Trend Report" Main Report

In December 5th, the southern financial international forum was held in Guangzhou by the central broadcasting and TV station, Guangdong, Hongkong and Macau, the big bay area headquarters and the southern financial and media group, and the twenty-first Century economic report.

With the theme of "innovation and openness", the forum will guide public opinion to stabilize market expectations and boost the quality of China's economy by focusing on China's capital market reform, the opening up of the financial sector, the innovation of the securities fund industry, and the capital operation of listed companies.

Twenty-first Century economic report reporter learned that the forum will also publish the "2019 China capital market trend report". Among them, the main report is made up of reform articles and open articles. Through the major events of the past two years, such as the launch of the science and innovation board, the Shanghai Stock Exchange and the expansion of the MSCI index, the main direction of the future development of the domestic capital market is prospectively judged.

Incremental and stock reform parallel

The landing of the registration system of the science and technology board has brought huge imagination to the comprehensive deepening reform of the capital market, and has also opened the prelude to the incremental reform of the domestic capital market.

From the proposed to the landing, registration system pilot in China has gone through more than eight years of history, the science and technology board has become the most important topic of leading the reform. By the end of November 2019, the company has received nearly 200 enterprises. Among them, the first red chip, the first share of the same rights, the first loss of business has also been one after another, which opened the A share market.

In the evening of January 30, 2019, after the implementation of opinions on the establishment of a scientific innovation board and the pilot registration system on the Shanghai stock exchange, and the continuous supervision method of the listed companies of the science and technology board (Trial Implementation), the Shanghai Stock Exchange issued six regulatory detailed rules, which made clear the rules for listing, listing and underwriting of the science and technology board, and the administrative measures for the listing committee.

The report points out that the listing conditions of Ke Chuang plate are mainly embodied in "inclusiveness". Science and technology enterprises have their own growth path and development law. Financial performance, many enterprises in the early stage of technological research and product development period, investment and income in the time does not match the characteristics, some enterprises have temporary losses, some enterprises in the research and development stage has not yet generated income.

In terms of market and financial conditions, the market launch conditions of the "Chuang Chuang" board were introduced. The market value index was combined with financial indicators such as income, cash flow, net profit and R & D input. 5 sets of differentiated listing indicators were set up to meet the needs of all kinds of venture capital companies that have broken through core technology or achieved phased results and have good prospects for development, but with different financial performance in key areas through continuous R & D investment.

One of the breakthroughs is to allow the existence of uncompensated losses and the listing of unprofitable enterprises. In addition, the science and technology board also set the corresponding listing standards for the red chip enterprises and special voting enterprises, opening the door for the two types of enterprises to list A shares.

When we proposed the establishment of the science innovation board and 1st anniversary of the pilot registration system, the inclusiveness of the science and technology board has already been reflected in many aspects: in September 27th, it became the first "special voting power" association enterprise, and the first A share company with the same rights and different rights.

On the other hand, the reform of stock is coming.

In October 18, 2019, the SFC issued a decision on Amending the management measures of major assets reorganization of listed companies. In November 8th, the SFC issued public opinions on the refinancing rules of listed companies' securities issuance management.

The reform of the Commission on mergers and acquisitions and refinancing reflects the guidance of the capital market for the real economy, highlighting the financing function of the capital market.

In addition, the SFC also consulted publicly on the revised Measures for the supervision and management of unlisted public companies and the newly drafted management measures for information disclosure of unlisted public companies (Draft for Soliciting Comments). At this point, the new three board also joined the reform queue.

The report pointed out that with the opening of the new three board comprehensive reform, the once silent three new board market was being activated.

After the opening of the reform, several new three Board companies have withdrawn their applications for listing on the science and innovation board. The new third board selection layer has become a channel for such enterprises to re open a higher level of capital operation. With the landing of selected layers, the financing function of the new three boards will be further enhanced, and the choice of enterprises to visit the capital market will officially leave the era of crowded wooden bridges.

In September 10th this year, the securities and Futures Commission held a forum on comprehensively deepening the reform of the capital market, and again put forward 12 key tasks of deepening the capital market reform comprehensively at present and in the coming period.

For improving the quality of listed companies, it involves the optimization of restructuring and listing, refinancing and other systems, supporting the pilot of the separation and listing, and strengthening the continuous supervision, classified supervision and precise supervision of listed companies.

It can be seen that since the beginning of this year, the basic system of capital market such as mergers and acquisitions, refinancing and so on has been continuously improved, and marketization and legalization become the direction of reform.

Under this logic, the details of the new three boards' comprehensive deepening reform, the reduction of the new rules and the reform of splitting and listing are also worth looking forward to. After the registration system of the Chuang Chuang board, the registration system reform of gem is expected to be clear and also expected by the market. With the continuous deepening of the "12 reforms in depth", the comprehensive deepening of the reform of the capital market will be the main axis of the 2020 policy.

Opening up is like flying stars.

While deepening the reform of the capital market, the opening of the domestic capital market has also taken a firm step.

Especially since the 2018 annual meeting of the Boao forum for Asia, the opening of the domestic capital market has obviously accelerated. Specific measures include a substantial relaxation of market access. We must ensure that the major measures to relax the restrictions on foreign capital stocks in the banking, securities and insurance industries will fall. Meanwhile, we should open wider to the outside world, speed up the opening process of the insurance industry, relax restrictions on the establishment of foreign financial institutions, expand the scope of foreign financial institutions' business in China, and broaden the field of financial market cooperation between China and foreign countries.

In twenty-first Century, the Capital Research Institute held that the opening of the domestic capital market is an important node on the line of Shanghai Stock Exchange, which can be divided into two stages.

The report points out that if the establishment of QFII and QDII system and the opening of Lu Tong pass are regarded as the "1 editions" of the opening of the domestic capital market, the landing of ETF between Shanghai and China and Japan and China will mean the two escalation of the opening range, which can be regarded as "2 editions".

The continuous opening of the market has produced the effect of "capital construction" accelerating the domestic capital market.

Taking the MSCI index as an example, in May 31, 2018, A shares were first included in the MSCI index with a factor of 2.5%. In August the same year, the A share was increased to 5%. This year, MSCI announced that in May, August and November, it would take three steps to increase A share from 5% to 20%.

The report holds that, although the scale of foreign capital flowing into China's capital market has expanded continuously in recent years, the overall shareholding ratio is still relatively low, and there is still room for further improvement in the future.

For example, domestic single foreign investors and all overseas investors hold 10% and 30% restrictions on the equity share of a single listed company. In the future, with the release of this restriction, domestic excellent listed companies are expected to get further matching of foreign institutions.

On the other hand, the accelerated inflow of foreign capital is also accelerating the perfection of the domestic capital market system. With the increase of foreign capital allocation and the increase of Chinese assets, more and more hedging measures are needed to lock risks. However, the "Puzzle" of the domestic derivatives market is far from complete.

How to help them form a more smooth configuration curve?

The report points out that only by vigorously developing futures and options based financial derivatives market, enriching hedging tools and increasing the market capacity of risk management.

In November 8th, the SFC announced that it had officially launched the pilot project to expand stock index options, and approved the Shanghai and Shenzhen Stock Exchange listed Shanghai and Shenzhen 300ETF options in accordance with the procedures, and the CSI 300 stock index options listed in CICC.

Among them, the Shanghai and Shenzhen 300 stock index options are extended on the basis of nearly 10 years of stable operation of Shanghai and Shenzhen 300 futures. The target coverage is not only much higher than the Shanghai 50ETF option, but also the contract value and design are more suitable for foreign institutional transactions to enter the domestic market at this stage.

The Shanghai and Shenzhen 300 stock index option is the first financial option product in China, and the demonstration significance is very significant. After the phased maturity of the product, the domestic financial derivatives will be pushed along the following three main lines.

First, the Shanghai and Shenzhen 300 stock index options will further expand to Shanghai Stock Exchange 50 and central card 500, thus forming a more complete coverage of stock index options family. Second, financial options products may expand to Treasury bond futures, such as the launch of the 5 year treasury bond option. Third, the icebreaking of financial options may bring opportunities for foreign exchange futures, thus laying the foundation for the prospect of foreign exchange options listing.

The accelerated influx of foreign capital and the deepening of the opening of the domestic capital market in 2019 have resulted in a very clear positive feedback from the two, which also boosts China's integration into the global capital market as soon as possible.

At the same time, the openness of the institutional level is carried forward in accordance with the principle of "fast, slow, and sooner rather than later".

The SFC has announced that it has lifted the limitation of foreign capital shares of fund management companies nationwide since April 1, 2020, and has lifted the limitation on foreign capital shares of securities companies nationwide since December 1, 2020.

The report points out that after the relaxation of foreign shareholding ratio, international capital will tighten up the layout of the Chinese market, and then bring new challenges to the domestic capital market. "Catfish effect" will also aggravate the competition of the domestic securities industry, and even do not rule out the possibility of reshaping the whole industry pattern.

The entry of foreign controlled financial institutions will also play a role as a "coach" to some extent, which will help domestic securities companies and Futures Company to become familiar with the business philosophy, system and business mode of overseas financial institutions as soon as possible. This is crucial in the current stage of speeding up the opening up of capital markets.

North direction Financial Action Report

With the gradual opening of the capital market, foreign capital is continuing to flow into the domestic market.

In terms of measuring the flow of foreign capital, the report selects the best northbound funds with the best data continuity as the main reference index. It gives a detailed analysis of the changes in the North's funds from the aspects of flow rate, flow direction and shareholding, and forecasts the trend of the next stage.

From the perspective of market performance in 2019, after the accelerated pace of opening up the domestic capital market in the first two years and the continuous rise of the blue chip stocks favored by foreign capital in the past two years, the rhythm of foreign capital entering the market in the first half of this year was once relatively cautious, and the overall inflow scale entered the stage bottleneck period.

From the perspective of the inflow rhythm, in December 28, 2018, the total amount of A shares held by the north capital was 641 billion 734 million yuan, and it grew to a high point of 770 billion 288 million yuan on the 1 day of April 2019, but it has been repeatedly entangled in this position for 5 months or so.

Until September, with the increasing expansion of MSCI, FTSE Russell and S & P Dow Jones three major international indexes, the capital holdings in the North rose again, and there was a very clear upward trend. By November 6th, the total foreign ownership has increased to 877 billion 570 million yuan.

The report points out that although the trend of inward capital continues to maintain inflow trend, it is significantly lower than that of other comparable countries and regions, and the space for future capital shareholding in North China is still very clear.

From the point of view of the transaction, although the number of constituent stocks currently incorporated into Shanghai Stock Exchange and Shenzhen stock exchange is only 579 and 682, it has gradually grown into a force that can not be ignored in the A share market.

In November 6th, for example, Shanghai Stock Exchange and Shenzhen Stock Exchange turnover totaled 37 billion 950 million yuan. On the same day, the total turnover of Shanghai and Shenzhen two cities was 452 billion 562 million, and that of the north capital accounts for 8.39%. In the future, with the increase of the number of shares in Shanghai Stock Exchange and Shenzhen Stock Exchange, it is estimated that the North going capital will continue the buying rhythm since September, and the shareholding scale will further increase.

From the point of view of flow, the mature capital market of foreign countries is dominated by investment institutions, and individual investors account for only a very low proportion. The overall market preference of the institutions tends to be good blue chips with good stability and continuous dividends. Therefore, the A share market generally believes that the northward capital is more inclined to blue chips, and the trend of the north direction of funds has been enough to explain in the past two years.

However, a comparative study found that this year the trend of north capital has begun to appear some subtle changes. In this regard, the report will be divided into three stages since the end of 2016.

In the first stage, from the end of 2016 to February 2018, the rate of capital inflow from Shenzhen stock to North was higher than that of Shanghai Stock Exchange; the second stage, from February 2018 to March 2019, Shanghai stock went through the opposite direction.

From the data point of view, the capital inflow of Shenzhen stock exchange is slightly higher than that of Shanghai Stock Exchange. From August 6, 2019 to November 6th, the capital inflow into the Shanghai stock market reached 61 billion 416 million yuan, and entered the deep stock market by 77 billion 454 million yuan, which led to a relatively limited lead.

The report points out that the key to changes in the intensity of foreign capital inflow in Shanghai and Shenzhen is the expansion of the scope of opening up to the outside world. Two. Due to the blue chip as the earliest open target, the total number of foreign capital holdings has begun to take shape, and the early stage basic allocation has been completed.

After completing the allocation of the existing stocks, the northward capital may enter the two choice stage, and the performance of the stocks will be obviously differentiated.

In fact, after analyzing the four indexes of "holding the number of foreign institutional investors", "holding quantity", "holding market value" and "shareholding ratio", the report has reached the potential differentiation possibility.

According to the ratio of the north to the free circulation shares, the fourth largest companies in the Shenzhen market are SUPOR, Huarun 39, and boss electric appliances, which account for 29.8%, 29.06% and 28.3% respectively.

On the Shanghai stock market, the top ranked companies were Founder Securities (36%), Hengli hydraulic (31.2%), Angel yeast (27.87%), Shanghai Airport (27.32%), Yifeng pharmaceutical store (26.04%).

The report points out that there are quite a few "relatively cold" targets in the foreign stocks with relatively high share of foreign capital, all of which are the leading companies in various sub sectors.

In this regard, the report summed it up as follows: simple business model, high profit margin, stable business performance, and brand advantage and partial monopoly capability.

Take China testing and testing as an example, the company is the third party testing leading enterprise in China. In recent years, the gross profit margin has stabilized at around 40%. At the same time, the market share of the private sector in the industry is relatively low, and the subsequent growth space is huge.

Another example is Angel yeast, the Chinese yeast one, has a market share of about 55% in the domestic yeast market, and two other world yeast industry leaders, 25% of the total domestic market share of Marley.

The report thinks that the leading enterprises in these small industries are also the focal points for the allocation of funds to the north. Only from the perspective of configuration rhythm, because of the relatively small total market capitalization and limited capital capacity, the allocation of foreign capital is easy to happen.