On November 30, the China Securities Regulatory Commission (CSRC) issued the “Opinions on Further Propelling the Reform of the New Share Issuance System” (the “Opinions” for short). After learning and discussing the “Opinions”, cadres and employees of the Shanghai Stock Exchange (SSE) said that the “Opinions”, which embodied common concerns of all market participants and absorbed all the wits of market players, would exert significant transformational influence on the reform and development of the capital market, and consolidate the institutional foundation for the sound growth of the capital market.
The SSE spokesman said that the “Opinions” responded in the field of the capital market the major viewpoint of “We should make markets play decisive roles in allocation of resources” put forward at the 3rd plenary session of the 18th CPC Central Committee. The “Opinions” took “New Share Issuance” as a key point to trigger the reform and development of the capital market. With the fundamental orientation of marketization and legal construction, the “Opinions” for the first time combed the significant relation between the government and the market in new share issuance. In the principle of “Each party of the market has fulfilled their functions”, the “Opinions” considerably enriched and perfected the contents and measures for the construction of the new share issuance system. With an aim to protect legal rights and interests of investors, the “Opinions” propelled the capital market to stress the concept of value investing and revitalize the investment function.
“The release of the “Opinions” marked a great transformational change in the relation between the government and the capital market”, said the SSE spokesman, “An employee said in the discussion: Reform is towards oneself, not others.” The ‘Opinions’ specified the time limit of examination of new share issuance, abandoned rights of value judgment and substantive examination, relieved technical controls over time point, pricing, and allotment, ushered in various market-oriented issuance ways, cemented the whole-process information disclosure of new share issuance, and embodied the regulatory authority’s clear recognition towards its self-positioning and the position of market participants. The great transformational change of the relation between the government and the market would be conducive to clarifying market expectations, enriching price information, reinforcing market constraints, and enhancing credibility”.
“The release of the “Opinions” symbolized a great transformational change in the institutional construction of the capital market”, said the SSE spokesman, “In light of actual conditions of the country and the society, the ‘Opinions’, facing harsh comment of ‘Financing outweighing returns’ in the market, reminded buyers, represented by small and medium-sized investors, of strengthening the sense of independent judgment and caveat emptor. The “Opinions” also exerted more harsh constraints on the behaviors of sellers, represented by issuers and major shareholders. Especially, the ‘Opinions’ put strict constraints on shareholding decrease, stabilization of share price, intent of shareholding, fulfillment of promise, information disclosure, and others for an array of chronic problems in the market such as ‘High Issuance Price, High P/E Ratios and Excessive Funds Raising’ and ‘Money Grabbing’, and gave some new arrangements for inspection and law enforcement, and aftermath accountability. The great transformational change in the institutional construction of the capital market would contribute to enhancing confidence in the market, protecting interest and rights of investors, and reinforcing constraints of equity financing”.
“The release of the “Opinions” indicated that the market would fully revitalize the investment function, and a major transformation from the ‘policy-guided market’ and the ‘speculation market’ to the ‘investment market’, as expected by experts, scholars, and market participants, would be realized as well”, said the SSE spokesman, “From the perspective of controlling speculation on new shares, the ‘Opinions’ put forward clear requirements for the work of exchanges, which was great significance for avoiding misguiding of heavy speculation, advocating the idea of value investing, building a close relation between the market and the real economy. In addition, the CSRC issued new regulations on preferred shares, dividend distribution, and back-door listing, which were of great importance for guiding value investing, stressing returns from listed companies, cracking down on market speculations, and building the ‘investment market’”.
“Reform, represented by the ‘Opinions’, is the biggest institutional dividend for the capital market. The reform of new share issuance boasted unprecedented broadness and depth, which indicated that the reformers fully understood the emerging and transitional capital market for the reform of new share issuance, and respected the history and the current situation; the reformers specified the positioning and borders of the government and the market, and respected themselves and the market; and they also highlighted marketization, legal construction, and protection of legal rights and interests of investors in the reform, and respected the actual conditions of the country and rules. We believed that the ‘Opinions’ would be conducive to the Chinese capital market in a long run. Especially, it would facilitate to build an investment-friendly capital market, after which a real-economy-oriented capital market would come into being”, said the SSE spokesman.
The SSE spokesman said that in order to implement the requirements of the “Opinions”, ensure the smooth operation of the market, and better protect interests of investors, the SSE initially planned to take 5 measures on the reform of new share issuance way and the regulation on new share listing. First, on the basis of initial preparations together with depository & clearing institutions, the SSE would continuously study and perfect the business rules of online subscription (linked with market capitalization) and offline allotment, comb relevant business procedures, and rationalize relevant work such as guidelines for issuing and listing; second, the SSE would promptly reconstruct relevant technical system for the reform of new share issuance, and timely tell issuers, underwriters, and investors; third, the SSE would prevent and control speculation on new shares, make more strict measures on price control on the first day of listing, require disclosure of more trading information on the first day of listing of new shares, cement management on eligible investors, and maintain the trading order of the market; fourth, the “Guidelines for the Content and Format of Announcement on Share Listing” would be amended, in a bid to strengthen the information disclosure of new share listing; fifth, the SSE would continue to reinforce the regulation work by putting the requirements for promise fulfillment and information disclosure towards relevant parties newly added in the reform into regular supervision and examination on the sponsor’s opinions on continuous supervision, and other work, as well as giving disciplinary punishments on the parties breaking their promises.