Recently, China's capital market has experienced an unprecedented shock, with the stock index rising rapidly from 2689.07 points to 3674.4 points in just 6 days, attracting national attention. It all began with the release of a series of economic stimulus policies since September 14, and the meeting of the Political Bureau of the CPC Central Committee on September 27, further highlighting the determination and importance of the economic stimulus. The decision-making mode and strength is unprecedented, marking that the development of the capital market has become a critical moment for the country's national fortunes in the future.
Why is this so important this time?
Because the intensity and style of stimulation were never seen before. Of course, that doesn't mean that everyone should enter the stock market right away, because even in a bull market, many people can still lose money. Without enough experience and knowledge, we should not blindly enter the stock market. For beginners, ETF index funds are a relatively safe choice, especially in technology, consumer, biomedicine and other fields have strong long-term growth potential. But all of this is just investment common sense, not specific investment advice.
The point is that behind the stimulus package reflects the unprecedented challenges facing the Chinese economy. It is extremely rare for the central bank to inject liquidity into the stock market directly through state credit, meaning that the remaining policy tools are limited. It also shows that the stimulus must be effective and turn the situation around.
Unconventional central Political Bureau meetings show that solving economic problems has been raised to a strategic level. It is not just about the economy, but also about China's long-term national fortunes. Through this series of policies, China is trying to reverse the current economic downturn, especially as the Fed cuts interest rates and hot money flows could shift to emerging markets.
China's policy target is clear —— to attract global capital inflows, enhance the liquidity of the domestic market!
From the recent performance of the stock market, the impact of the policy has been initially shown, trading volume and stock index have risen significantly. By creating a structured monetary policy tool in the capital market, the central bank has provided a huge amount of money to invest in the stock market and lowered the reserve requirement ratio to further release liquidity. The foreign exchange market was also affected by policy, with the yuan rising strongly against the dollar.
At the same time, China has also introduced a number of macro policies, including boosting consumption, increasing investment, helping businesses and stabilizing the property market, to meet economic challenges. The policy of "convenient exchange of securities, funds and insurance companies" issued by the central bank further shows the importance of the stability and liquidity of the capital market. These measures show that policy is not only to boost the market in the short term, but also to enhance the basis for the long-term healthy development of the market.
Foreign investors reacted positively to this round of policy, with many international hedge funds and institutional investors bullish on the long-term performance of the Chinese stock market, with overall foreign inflows remaining strong despite some investors such as Buffett gradually reducing their holdings. For the domestic capital market, the future direction is likely to be the transformation from the financing market to the investment market. Ren Zeping pointed out that the registration system reform means that the capital market will put more emphasis on the long-term value of enterprises and the delisting mechanism, thus promoting a healthier market environment.
The primary market will also benefit from these policies, especially in mergers and acquisitions. Policies support m & a funds and private equity funds to actively participate in M & A, simplifying the process and providing more flexible arrangements for the exit of private equity funds. At the same time, mergers and acquisitions will become one of the important ways to exit the primary market, especially the technology innovative enterprises will realize the exit of early investors through mergers and acquisitions.
However, mergers and acquisitions still face valuation challenges and consolidation challenges. The expected difference in valuation between buyers and sellers, the complexity of cross-industry mergers and acquisitions, and the management and operation problems after integration are all risks that cannot be ignored. At the same time, the introduction of patient capital becomes the key, and institutional investors need to have a long-term investment vision, and realize value appreciation through industrial empowerment and resource integration.
To sum up, China's recent capital market policies are not only aimed at solving short-term economic problems, but also laying the foundation for the long-term healthy economic development. This round of economic stimulus policy is significant, and its impact on China's capital market and even the overall economy will be profound. We are at a critical moment in history, and the future of China's capital market is closely linked to the economic destiny of the country.
Annex: Press conference of the State Council to support the key points of capital market policy
Core Policy | Depart- ment | Details |
Create new monetary policy tools to support the stable evelopment of the stock market | Cetral Bank | The first instrument is the exchange of securities, funds and insurance companies. This work support is qualified securities, funds, insurance companies, these institutions by the CSRC, financial supervision bureau in accordance with certain rules, can use their bonds, stock ETF, csi 300 component assets as collateral, from the central bank into government bonds, central bank bills and other high liquidity assets. The replacement with the central bank can obtain relatively high-quality and highly liquid assets, which will greatly improve the capital acquisition ability of relevant institutions and the ability of increasing stock holdings. We plan to facilitate the initial phase of the operation of 500 billion yuan, and expand the scale in the future according to the situation. In the first phase of 500 billion yuan, another 500 billion yuan, or even a third 500 billion yuan. The funds obtained through this tool can only be used to invest in the stock market. The second tool is stock repurchase and overweight reloan, which guides commercial banks to provide loans to listed companies and major shareholders for repurchase and increase the shares of listed companies. In fact, shareholders and listed companies repurchase or increase the shares of companies, which is a very common trading behavior in the international capital market. The central bank will issue reloans to commercial banks, providing 100% financial support, and the interest rate is 1.75%. The interest rate of commercial banks to customers is around 2.25%, which means 0.5 percentage points. The interest rate of 2.25% is also very low. This tool is applicable to all listed companies with different ownership ships; |
SAC | The focus of developing equity public funds is to urge public funds to reduce the comprehensive rate steadily and adhere to the investor return oriented; in the next step, we will further optimize the registration of equity fund products, vigorously promote the innovation of broad base ETF and other index products, and timely launch more small-cap ETF fund products including gem, science and innovation board... Moreover, | |
The National Financial Regulatory Adminis- tration | The State Administration of Financial Regulation has always attached great importance to the capital market and actively guided banks, insurance and asset management institutions to maintain the stability of the capital market. In the early stage, with the consent of The State Council, we promoted China Life Insurance and New China Life Insurance to carry out pilot projects, jointly initiated the establishment of private equity investment funds, and raised insurance funds to invest in the capital market. The fund has a registered capital of 50 billion yuan and has officially started investment operation. It is progressing smoothly. In the next step, we will continue to support the sustained and steady development of the capital market. First, we will expand the pilot reform of long-term investment in insurance funds, and support other eligible insurance institutions to set up private equity investment. Second, we will urge and guide insurance companies to optimize the assessment mechanism, and encourage and guide long-term equity investment in insurance funds. Third, encourage wealth management companies and funds to further increase their investment in the capital market. Trust companies should strengthen the capacity building of equity investment, issue more long-term equity products, actively participate in the capital market, and cultivate and strengthen patient capital through multiple channels. |