CSRC Outlines 12-Point Plan for Boosting Confidence of Capital Market

The CSRC (China Securities Regulatory Commission) and on Monday (11 April) outlined a 12-point plan for stabilising the domestic capital market and boosting investor confidence, including support capital raising efforts, encourage asset managers to buy up equities, and encourage listed companies to buy back shares and raise dividends. 

The plan was issued together with SASAC (State-owned Assets Supervision and Administration Commission of the State Council) and ACFIC (All-China Federation of Industry and Commerce), following repeated vows by Chinese authorities in recent weeks to stabilise the economy.

Amid a worsening Covid outbreak, lockdowns and ensuing disruptions to businesses depress the outlook for growth and earnings, the CSI 300 Index is down 17 percent year-to-date, compared to a 10 percent fall in the MSCI Asia Pacific Index and around a 7 percent drop in MSCI's measure of global stocks. Since the start of April alone, the CSI 300 Index has lost close to 10 percent of its market value.

In a late-night statement, the CSRC said the plan is intended to promote the healthy development of listed firms whose operations face challenges in the current market environment.

The plan includes pledges to support listings, mergers, acquisitions, and bond issuance by private firms. Listed companies will also be exempted from initial and annual listing fees, online voting service fees and other fees for 2022.

Social security funds, pension funds, trusts, insurance and wealth management institutions will also be encouraged to allocate more funds into equity assets and the capital market, particularly in shares of high-quality listed firms.

The plan also calls on listed companies to buyback their shares for equity incentives and employee stock ownership plans, and to increase their dividend payouts to "enhance the sense of gain for investors". Listed companies are also asked to respond to investor concerns by holding annual report performance briefings and media interviews, and by issuing press releases and official public announcements.

Major shareholders, board directors, supervisors and senior executives are asked to increase their holdings when their company's stock falls sharply and to refrain from selling their shares except if done "in a standardised and orderly manner".

Financial institutions will be encouraged to actively negotiate with major shareholders who have used company shares as collateral for loans, in order to prevent forced liquidations, defaults and heavy stock losses.

The SASAC in particular will provide guidance to state-owned listed companies asking them to buy back more shares, increase cash dividends and promote the stable development of the capital market.

Earlier in the day, the CSRC had asked large mutual fund houses in the country to refrain from selling A-shares on a net basis. According to Bloomberg, the verbal request was given to prevent panic selling and put a floor under China's stock market.

Source: Regulation Asia