Capital market hails government’s thrust on reforms, fundamentals

Sustained development of China’s capital market can be expected as the central government has confirmed its stance on perfecting the fundamental market mechanisms in the latest Government Work Report, said experts.

According to the report delivered by Premier Li Keqiang at the opening of this year’s session of the 13th National People’s Congress in Beijing on Friday, continued efforts will be made this year to advance the reform of registration-based initial public offering mechanism in the A-share market.

Registration-based IPO mechanism was first experimented at the Nasdaq-style STAR Market at the Shanghai Stock Exchange in July 2019. The mechanism was adopted at the technology-focused ChiNext in Shenzhen last August.

Cheng Shi, chief economist at ICBC International Holdings Ltd, said the registration-based IPO mechanism will play a key role in China’s ongoing financial reform, supported by a multilevel delisting mechanism. Only in this way can a high-standard market system be built and investment truly lead industrial upgrading.

The work report also stressed that delisting mechanisms should be normalized and perfected. It is the first time in the last eight years that the delisting mechanism is being included in the work report.

China’s Central Committee for Deepening Overall Reform passed in November the action plan to complete A-share market’s delisting mechanism. The plan said that delisting standards should be perfected and delisting procedure simplified. Public companies should be able to exit from the exchange in more ways while the delisting supervision needs to be reinforced.

Zhongshan Securities’ chief economist Li Zhan said that the work report has demonstrated the regulator’s resolution to remove the disqualified companies from the Ashare market.

“The registration-based IPO reforms must be coordinated with a responsive delisting mechanism. It is only by controlling both the entrance and exit of the market can a deepened capital market reform be realized and a sound market order built. The combination of the IPO and delisting mechanism will generate a positive influence on the capital market,” he said.

The benchmark Shanghai Composite Index fell 0.04 percent on Friday, while ChiNext gained 0.7 percent. Experts from Jufeng Investment Information said the recent fluctuations in A shares will not alter the bullish trend in the long run. As the COVID-19 stabilizes in overseas markets and profitability of A-share companies further improves, a new uptrend will emerge, the experts said.