Capital market reform measures focus on enhancing the market's inherent stability, serving high-quality economic development, and protecting the legitimate rights and interests of small and medium investors.

On April 12, the State Council issued the "Several Opinions on Strengthening Supervision, Guarding Against Risks, and Promoting High-Quality Development of the Capital Market" (referred to as the new "Nine National Articles"). The new "Nine National Articles" proposed: promoting listed companies to enhance investment value; formulating guidelines for market value management of listed companies; and intensifying the reform of mergers and acquisitions (M&A) to invigorate the M&A market through various measures. On September 24, the State Council Information Office held a press conference on the financial support for high-quality economic development, and the chairman of the China Securities Regulatory Commission (CSRC), Wu Qing, attended the meeting and introduced the financial support for high-quality economic development from the perspective of capital market development. The main content includes:

1) Establishing a clear orientation of rewarding investors and improving the quality and investment value of listed companies. On the same day, the CSRC publicly solicited opinions on the "Guidance for the Supervision of Listed Companies No. 10 - Market Value Management (Draft for Comments)".

2) Accelerating investment-side reforms and promoting the construction of a policy system for "long-term money for long-term investment". The CSRC stated that it would soon issue the "Guiding Opinions on Promoting Medium and Long-Term Capital into the Market".

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3) Focusing on serving key areas such as new quality productive forces and invigorating the M&A market through various measures. On the same day, the CSRC issued the "Opinions on Deepening the Reform of the Listed Company M&A Market" and publicly solicited opinions on the "Decision on Amending the Measures for the Administration of Major Asset Restructuring of Listed Companies (Draft for Comments)".

4) Emphasizing the protection of the legitimate rights and interests of small and medium investors. Resolutely cracking down on illegal and irregular behaviors such as financial fraud and market manipulation.

5) Further supporting the arrangements for the Central Huijin Company to increase its holdings and expand its investment scope, and actively supporting various funds, including insurance funds, to increase their entry into the market.

The market value management of A-shares officially enters a new stage of policy support and standardized development.

On January 24, 2024, the relevant person in charge of the State-owned Assets Supervision and Administration Commission of the State Council (SASAC) stated at a press conference that the effectiveness of market value management would be included in the assessment of the heads of central enterprises. On January 25-26, the CSRC held the 2024 system work conference, which emphasized the promotion of including market value in the assessment and evaluation system of central and state-owned enterprises. On April 12, the State Council issued the new "Nine National Articles", emphasizing the formulation of guidelines for market value management of listed companies. The CSRC's release of the draft guidelines for market value management of listed companies marks the first time that the capital market has issued a special institutional document specifically for the market value management of listed companies, signifying that the market value management of A-shares has officially entered a new stage of policy support and standardized development. The guidelines for market value management of listed companies systematically elaborate on the objectives, definitions, methods, main responsibilities, and prohibited matters of market value management, with specific content including:

1) Clarifying the definition of market value management. Market value management is a strategic management behavior implemented by listed companies based on improving the quality of listed companies to enhance the ability and level of investor returns. Listed companies should carry out market value management based on improving the quality of listed companies, and legally and compliantly use methods such as mergers and acquisitions, equity incentives, employee stock ownership plans, cash dividends, investor relations management, information disclosure, shareholding increases, and share buybacks to enhance the investment value of listed companies.2) Clarify the responsibilities and obligations of relevant entities. The responsibilities and obligations of listed company boards of directors, directors, senior management personnel, controlling shareholders, and other related entities have been clearly defined. Firstly, the board of directors should prioritize the improvement of the company's quality, fully considering the interests and returns of investors in all major decisions and specific work. Secondly, the chairman should supervise, promote, and coordinate the relevant work, and directors and senior management personnel should actively participate in all work aimed at enhancing the investment value of the listed company. Thirdly, the secretary of the board should manage investor relations and information disclosure effectively. Fourthly, controlling shareholders can boost market confidence through share increases and other means under certain conditions.

3) Clarify special requirements for two types of companies. Firstly, companies that are major components of indexes should establish and publicly disclose a market value management system, specifying specific responsibilities, internal assessments, and evaluations, and provide a special explanation of the system's implementation during the annual performance briefing. Secondly, companies that have been trading below their net asset value for a long time should disclose a valuation enhancement plan, including targets, timeframes, and specific measures, and provide a special explanation of the plan's implementation during the annual performance briefing.

4) Clarify prohibited matters. Listed companies and related parties must enhance their awareness of compliance and must not engage in market manipulation, insider trading, or other illegal and non-compliant activities under the guise of market value management.

Mergers and acquisitions (M&A) and reorganization systems emphasize support for the development of new quality productive forces, strengthen industrial integration, increase regulatory tolerance, and improve reorganization efficiency.

The China Securities Regulatory Commission (CSRC) has researched and formulated the "Opinions on Deepening the Reform of the Listed Company M&A and Reorganization Market," with the main content including: 1) Support listed companies to transform and upgrade in the direction of new quality productive forces. The CSRC will actively support listed companies to carry out M&A and reorganizations around strategic emerging industries and future industries, including cross-industry M&A based on transformation and upgrading goals, acquisitions of unprofitable assets that help to strengthen the chain and improve key technical levels, and support for "two-creation" sector companies to merge upstream and downstream assets in the industry chain, guiding more resource elements to gather in the direction of new quality productive forces. 2) Encourage listed companies to strengthen industrial integration. Help traditional industries to reasonably increase industrial concentration and improve resource allocation efficiency through reorganizations. For integration needs between listed companies, support will be provided by improving the lock-up period regulations and significantly simplifying the review process. At the same time, through arrangements such as the "reverse linkage" of the lock-up period, private equity funds are encouraged to actively participate in M&A and reorganizations. 3) Further improve regulatory tolerance. Increase tolerance for matters such as reorganization valuation, performance commitments, same-industry competition, and related transactions. 4) Improve the transaction efficiency of the reorganization market. The CSRC will support listed companies to issue shares and convertible bonds in installments and other payment tools, pay transaction consideration in installments, and provide installment financing in accordance with transaction arrangements to increase transaction flexibility and capital use efficiency. At the same time, establish a simplified review process for reorganizations, significantly simplify the review process, shorten the review time limit, and improve reorganization efficiency for listed companies that meet the conditions. 5) Improve the service level of intermediary institutions. 6) Strengthen supervision in accordance with the law.

The CSRC is publicly soliciting opinions on the "Decision on Amending the 'Administrative Measures for the Reorganization of Major Assets of Listed Companies' (Draft for Comments)," with the main revision content including: 1) Promote the implementation of installment payment for reorganization shares. Extend the validity period of the approval for transactions involving the purchase of assets through installment issuance of shares to 48 months. 2) Increase tolerance for same-industry competition and related transactions. Adjust the relevant provisions to "same-industry competition that does not result in new significant adverse effects, and related transactions that severely affect independence or are obviously unfair." 3) Establish a simplified review process for reorganizations. Clearly, reorganization transactions that apply to the simplified review process do not require deliberation by the securities exchange's M&A and reorganization committee and can be registered within 5 working days. 4) Improve the lock-up period rules to support absorption mergers between listed companies. Set a 6-month lock-up period for the controlling shareholders of the absorbed company,参照短线交易限制, and if it constitutes an acquisition, implement the lock-up period requirements of the "Administrative Measures for the Acquisition of Listed Companies"; there is no lock-up period for small and medium shareholders of the absorbed company. 5) Encourage private equity funds to participate in the M&A and reorganizations of listed companies. Implement a "reverse linkage" between the investment period of private equity funds and the lock-up period of shares obtained through reorganizations. For private equity funds with an investment period of 5 years, the lock-up period in third-party transactions is shortened from 12 months to 6 months, and the lock-up period for small and medium shareholders in reorganization listings is shortened from 24 months to 12 months.

Since the beginning of the year, the attention and practice of A-share listed companies in market value management have increased.

With the strengthening of policy support for the market value management of listed companies, the attention and practice of listed companies in market value management have increased from the beginning of the year to the present (as of September 24). Listed companies have explored the path of market value management through various means such as dividends, repurchases, equity incentives, increases, and M&A and reorganizations. Specifically: 1) The return situation of listed companies in 2023 continues to improve, with the dividend scale of A-shares in 2023 reaching 2.2 trillion yuan, the proportion of dividend-paying companies increasing from 64.9% in 2022 to 72.4%, and the overall dividend ratio of A-shares increasing from 41% in 2022 to 42% in 2023. 2) The repurchase amount of listed companies so far this year has reached 138.63 billion yuan, close to the full-year amount of 152.67 billion yuan in 2023. 3) According to the announcement date of the plan, a total of 484 A-share listed companies have issued 538 equity incentive plans (excluding unapproved plans) so far this year, and 632 listed companies have issued 726 equity incentive plan schemes in 2023. 4) The scale of secondary market increases by listed company shareholders and executives so far this year has reached 65.92 billion yuan, with a full-year scale of 86.88 billion yuan in 2023. 5) The completion amount of M&A and reorganizations involving listed companies (involving listed companies as bidders, transferors, and target companies) so far this year has reached 415.8 billion yuan, with a full-year scale of 1,150.9 billion yuan in 2023.

The capital market "1+N" policy system continues to be improved, and policy reinforcement may drive market sentiment to continue to rebound.

The regulatory authority conveyed at this National News Conference that it adheres to the tone of "strengthening the foundation, strict supervision and management, insisting on promoting development and stability through reform, and continuously improving the capital market functions that coordinate investment and financing." This helps to boost market sentiment and enhance market confidence. At the same time, the issuance of the listed company market value management guidelines has clarified the direction for listed companies to carry out market value management, which helps listed companies to take various measures to improve the quality and investment value of listed companies, enhance the capital market's ability to reward investors, and increase the investment attractiveness of A-shares. The market-oriented reform of the M&A and reorganization system helps to further stimulate the vitality of the M&A and reorganization market, strengthen the resource allocation function of M&A and reorganizations, play the main channel role of the capital market in corporate M&A and reorganizations, adapt to the needs and characteristics of new quality productive forces, and support listed companies to inject high-quality assets and enhance investment value. We believe that the "1+N" policy system of the capital market is expected to continue to be improved. The CSRC pointed out at the meeting that it will issue the "Guiding Opinions on Promoting Long-term Capital into the Market" in the near future, and promote the establishment of a market-oriented incentive and restraint mechanism for the repurchase of listed company shares. The future issuance of relevant system rules and regulations will help further improve the basic system of the capital market, promote the role of the market, and help promote the high-quality development of the capital market.Looking at the performance of the A-share market, after experiencing a volatile correction in late May, the market sentiment has rebounded significantly in the last two trading days, buoyed by a package of policies aimed at stabilizing growth, the market, and expectations from the National News Conference. We believe that after a sharp short-term rise, the market may encounter some twists and turns, but the rebound is still expected to continue. Proactive policies help to boost investor confidence, and the current A-share market also shows clear bottoming characteristics in technical indicators such as trading volume, turnover rate, capital flow, and valuation.

In terms of allocation, in line with market value management requirements, it is recommended to pay attention to the relative performance of high-quality companies that have been oversold and are trading below their net asset value. In conjunction with the征求意见稿 (solicitation of opinions draft) for market value management guidelines, companies that have been trading below their net asset value for a long time should formulate and disclose a plan to enhance the valuation of listed companies after review by the board of directors. We have compiled a list of some enterprises in the current A-share market with a price-to-book ratio (PB) below 1 and a larger market value for investors' reference. Please see the original report for details.