The new “National Nine Articles” look towards the future, with the development of modernization featuring Chinese characteristics at its core, aiding in the realization of the dream of becoming a financial powerhouse. This plan sets out phased objectives for the development of the capital market, which are expected to have a lasting impact on securities issuance, delisting rules, supervision of listed companies, and the overall operating environment of the capital market.
As China’s capital market implements a comprehensive registration system, and after the A-share market has gone through fluctuations, the state has proposed the new “National Nine Articles” policy. The “Several Opinions on Strengthening Supervision, Preventing Risks and Promoting High-Quality Development of the Capital Market” issued by the State Council marks a new direction in policy, following the two versions of the “National Nine Articles” in 2004 and 2014, a strategic adjustment that occurs once every decade has officially begun.
Wu Qing, the chairman of the China Securities Regulatory Commission, pointed out three highlights of the new “National Nine Articles” when interpreting the policy. First, it fully demonstrates the political nature of the capital market serving the national interest and the people-oriented nature of serving the people. Second, it focuses on the main direction of strengthening supervision, preventing risks, and promoting high-quality development. Lastly, it shows the strategy that is clear in its objectives and problem-oriented.
The new “National Nine Articles” focus on modernization with Chinese characteristics, anchoring the grand goal of becoming a strong financial nation, and outlining the developmental blueprint for the capital market over the next five years, for 2035, and for the mid-21st century in phases. It outlines the future development contours from multiple dimensions, including investor protection, quality of listed companies, growth of financial institutions, improvement of regulatory capabilities, and the construction of the governance system.
To implement this strategy, the CSRC is working with relevant parties to create a “1+N” policy system, including the “Opinions”, where “N” refers to multiple supplementary institutional regulations. In March of this year, the CSRC has released policy documents that strictly control securities issuance and strengthen the supervision of listed companies, and in April, documents that strengthen the delisting supervision were published. At the same time, six major institutional rules are also soliciting public opinion, and the related self-disciplinary rules of the exchange are also under public consultation.
In the listing and issuance fields, the new “National Nine Articles” proposes raising the listing standards of the main board market and the growth enterprise board, as well as improving the evaluation criteria for the STAR Market as an innovation highland. At the same time, in view of the strict issuance and listing conditions, the policy also emphasizes the necessity of strengthening delisting supervision, especially the strictness of various delisting indicators such as significant violations, standardization, financial condition, and transaction behavior.
Market supervision and the market itself need to develop a new type of mutual trust and interactive mechanism. Market participants need to understand that the regulatory measures in the new era are not just a simple review of past policies. They will have new impacts and bring corresponding supporting measures to protect the legitimate rights and interests of investors.
“The ‘1+N’ policy system is an organically integrated whole that must be advanced collectively and systematically implemented.” “Next, we will also study and develop reform measures for the long-term development of the capital market based on in-depth research.” It is worth noting that after the implementation of previous policies, the A-share market has welcomed an uptick. After a decade of silence, the reintroduction of new policies naturally makes market participants look forward to the future with great expectations.
Analysts at CITIC Securities believe that this batch of new policies serves as a clear direction for the blueprint of capital market reforms over the next decade, playing a crucial role in forming consensus and strengthening awareness, and also establishing a solid foundation for the sustained stable development of the capital markets. However, seasoned analysts have expressed a different view, pointing out: “The real driving force behind stock price increases comes from the improvement of companies’ fundamentals and the growth of intrinsic values, and the formation of a bull market also relies on the continuous improvement of the economy, the enhancement of corporate performance, and the firm confidence of investors in future economic prospects.”
Jiang Yangjinjin, the manager of BOCOM Schroders Fund, suggests that past rapid accumulation of wealth was largely due to the rise in asset prices, and that mere holding gains are not significant. As the market increasingly values shareholder returns, new quality assets not only have room for price growth due to declining low-risk interest rates but also include possible stable dividend growth, which may become an important component of household wealth in the future. The core function of the capital market may also shift from simple financing to a multidimensional focus on financing and shareholder returns.
From a market perspective, “The A-share market has risen from 2600 points to 3000 points, and has already completed its initial development task; what needs to be observed in the future is whether further policies will be implemented to solve key market issues,” said an expert who has participated in the discussions of the China Securities Regulatory Commission.
Regarding the management of market entry thresholds: From the second half of 2023, companies planning to go public will face a stricter IPO review process. According to Wind data, the number of companies that have passed the review so far this year has declined significantly compared to the same period in 2023. The number of companies that have terminated their IPO process also saw a substantial increase compared to the same period last year. The implementation of new policies has once again emphasized the importance of market entry thresholds, involving measures to improve the quality of listed companies, the responsibility of issuers and intermediary institutions, and the enhancement of listing standards.
For instance, on the evening of April 12, 2023, the Shanghai and Shenzhen Stock Exchanges updated related business rules and solicited public opinions, with the rules involving raising listing standards for the main board and the growth enterprise board, encouraging listed companies to improve investment value through mergers and acquisitions. The proposal suggests increasing the threshold for main board and growth enterprise board in terms of net profit, net cash flow, operating revenue, market value, etc.
Against the backdrop of continuous development and innovation in the capital market, the recently released “National Nine Articles” greatly raised the threshold for corporate listings. According to industry insiders, under the effects of the new regulations, some companies that are still in the queue for IPO review, if unable to meet the raised standards, will have no option but to withdraw their applications. These companies may seek to list on other market segments, but this means they will have to restart the declaration process, including project establishment, coaching, acceptance, etc.
For these companies facing re-declaration, the situation is relatively complicated. A seasoned investment banker from a securities firm, using the pseudonym Zhou Yang, suggests that companies should focus on improving their performance, and be fully prepared when re-entering the listing window. The Beijing Exchange, with its relatively relaxed listing conditions, has become a new choice for many companies. However, Zhou Yang notes that as the number of applicant companies increases, the competition becomes increasingly fierce.
The Shanghai and Shenzhen stock exchanges have not only raised the financial standards for the main board and the GEM board but have also put forward stricter requirements for the “science and innovation attributes” of companies on the STAR Market. According to the revised “Guidelines for the Evaluation of Science and Innovation Attributes (Trial)”, companies need to meet higher standards in terms of R&D investment, the number of invention patents, and revenue growth. This, to some extent, guides intermediary agencies to improve the quality of company audits and enhances the “hard technology” characteristics of the STAR Market.
In terms of regulatory standardization, the new policy states that the proportion of random checks will be increased through the “CSRC Random Inspection Items List”, as well as the overall proportion of on-site inspections and supervision, to ensure that responsibilities at each link of the listing chain are further reinforced. Furthermore, the focus is on clarifying the audit responsibilities of the exchanges, optimizing the formation and operational mechanisms of the stock listing committees, and strengthening the ongoing supervision of committee members’ duties.
The new “National Nine Articles” also emphasize establishing a review traceability mechanism to hold issuers and intermediary organizations accountable. At the same time, in the issuance underwriting phase, the regulation will strengthen supervision of the inquiry pricing and allocation of new stock issuances, rectify market malpractices, enhance the supervision of information disclosure for fundraising projects, and coordinate penetrating supervision, to combat illegal practices such as holding shares on behalf of others and abnormal price surges from shareholding entries.
Meanwhile, the new policy also proposes to intensify the supervision of delisting, clarifying the direction of “should delist as much as possible,” focusing on improvements from aspects such as stringent delisting standards, smoothing diversified delisting channels, reducing the value of “shell” resources, strengthening delisting regulation, and perfecting investor compensation and relief mechanisms. The release of the new delisting regulations and the subsequent introduction of relevant SSE and SZSE delisting provisions are all important measures to ensure the healthy and orderly development of the capital market.
Compared to previous provisions, the intensity of the newly released delisting policy has been significantly increased and has been optimized in four main aspects. This includes expanding the scope of application for compulsory delisting for serious illegal behaviors, adding standardized delisting scenarios, strengthening the standards for financial delisting, and improving the indicators for trading-related delisting.
Specifically, the expansion of the scope for compulsory delisting for major illegalities includes two main aspects. Firstly, in resolutely eliminating serious fraud, if a company has engaged in fraudulent behavior for three consecutive years or more and has been affirmed by administrative penalties, it will be resolutely delisted. Secondly, the delisting standards of “the amount of fraud plus the percentage of fraud” have been further lowered. For instance, the original standard required two consecutive years of fraudulent amounts exceeding 500 million yuan and a fraud percentage over 50%, but now it has been adjusted to a single year with a fraudulent amount over 200 million yuan and a percentage over 30%, or fraud over 300 million yuan and a percentage over 20% within two years to trigger delisting.
The newly added standardized delisting scenarios in the new rules include three situations: “continuous multi-year non-standard internal control opinions”, “long-term disordered struggle for control rights leading to investors being unable to obtain effective information from the listed company”, and “listed company’s internal control failure resulting in large shareholders occupying a large amount of funds without rectification”.
Financial delisting conditions are now set more strictly. For instance, regarding the delisting risk warning criteria for loss-making enterprises, the Science and Technology Innovation Board and the Growth Enterprise Market have merely added “total profit” to the scope of loss consideration indicators. The revised standard takes the negative figure among total profit, net profit, and non-net profit excluding extraordinary items as the criteria for consideration. The main board market has not only made the aforementioned adjustments but has also raised the minimum revenue requirement from 100 million yuan to 300 million yuan. Furthermore, it has introduced a mechanism that emphasizes the audit opinion of internal controls within financial reporting, aiming to delist companies with warning signs of delisting due to internal control issues, thereby raising the normative requirements for the revocation of delisting risk warnings.
In terms of market value-based delisting criteria, the main board market has also made adjustments. It is now stipulated that if “the total market value of daily closing stock prices on the exchange” is below 500 million yuan for “consecutive 20 trading days,” delisting may be triggered, which is an increase from the previous threshold of 300 million yuan.
Based on data from recent years, under the impetus of comprehensively implementing the registration system reform, the efficiency of delisting in the A-share market is continuously improving. Taking the data from 2023 as an example, Wind data shows that a total of 47 companies were delisted from the A-share market, which was a historical high. Specifically, 44 were mandatory delistings, 1 was voluntary, and 2 were delisted through restructuring. Since the beginning of this year, companies such as *ST Huayi, *ST Balong, *ST Panhai and others, totaling 9, have officially left the A-share market. As of April 25, 2024, a cumulative total of 275 companies have exited the A-share market, with over 160 being delisted in the past five years, accounting for about 60%.
However, in comparison with the number of newly added stocks, the current scale of delisting is still slightly small, and relative to the US and Hong Kong stock markets, the number of delistings in the A-share market is also lower.
Capital market experts point out that these latest delisting rules are stricter and more detailed compared to previous regulations. This helps in eliminating low-quality listed companies and accelerates the survival of the fittest process in the capital market, thereby giving investors more opportunities to choose high-quality listed companies. In addition, for the companies that meet the delisting criteria, it’s essential to strictly implement the new delisting rules, resolutely carry out delisting, and combat the malicious behavior of “shell preservation” to reduce the so-called “phoenix” phenomenon.
With the continuous optimization of the capital market order, relevant departments are striving to promote value investing as the mainstream investment concept in the market, and by clearing bad equity, aim to make it the market’s righteous path.
In order to further regulate the behavior of shareholder reduction in listed companies, related regulatory rules have been strengthened. According to the newly promulgated “National Nine Articles,” the reduction behaviors of listed company shareholders are under stricter monitoring, especially for major shareholders and key controlling shareholders. The principle that substance takes precedence over form has been strengthened to prevent various means of evading the reduction. Violations in reduction will be subject to severe punishment, including forcing violators to buy back inappropriately reduced shares and turn over the difference.
On April 12th, China Securities Regulatory Commission (CSRC) publicly sought comments on the draft rules of “Management Measures for Shareholders’ Reduction of Holdings in Listed Companies” and “Management Rules for Shares Held by Directors, Supervisors and Senior Management Personnel of Listed Companies and Their Changes”. The new “Reduction Measures” are an upgraded version based on the previous “Several Provisions on the Reduction of Shareholding by Shareholders, Directors, Supervisors, and Senior Managers of Listed Companies” and will be issued as CSRC regulations, reflecting the regulator’s firm attitude towards regularizing sell-off behaviors.
The “Reduction Measures” have adjusted and improved some issues that caused strong market reactions based on the current rules. For instance, for the highly concerned “divorce-style sell-off,” it is made clear that the parties involved in the sell-off due to divorce, legal dissolution, or spin-offs, must continue to jointly comply with the restrictions on the reduction of holdings. Additionally, some disguised sell-off behaviors in the market, such as “restricted stock lending” and “short selling,” are directly prohibited.
Meanwhile, the “Reduction Measures” also link the reduction to the dividend situation of the listed companies, stipulating that in cases where the stock price breaks or the dividends do not meet the standard, the controlling shareholders and actual controllers are not allowed to reduce their holdings via block trading or centralized competitive trading. This move is aimed at encouraging listed companies to increase dividends and better reward investors.
Further cash dividend regulatory measures are also reflected in the new “National Nine Articles,” which apply risk warnings to companies that do not distribute dividends long-term or have a low dividend ratio. Various measures are encouraged to increase the dividend payout rate, including multiple dividends, advance dividends, and distributing dividends before the Chinese New Year.
In addition, for large-scale cash dividends carried out by companies before going public, the new “National Nine Articles” have added a negative list for issuance and listing, and both Shanghai and Shenzhen Stock Exchanges, as well as the Beijing Exchange, have indicated they will strengthen the supervision of such activities, guiding companies to avoid cash dividends during the declaration stage.
To encourage companies to better utilize accumulated profits to promote their own development or share profits with new shareholders after listing, the Shanghai and Shenzhen Stock Exchanges will take new measures. Specifically, for those companies that have reported a cumulative dividend amount over the last three years that exceeds 80% of the net profits, or whose dividend ratio exceeds 50% with a cumulative dividend amount over 3 billion yuan, and where the proportion of raised funds used for supplementing working capital and repaying debts exceeds 20%, will be prohibited from issuing new shares for listing.
Further strengthening the rules, the Beijing Exchange will also implement compulsory measures for listed companies that do not meet the dividend requirements, including long-term non-dividend or extremely low dividend ratio companies into the category of “implementation of other risk warnings (ST)”. It is important to note that this ST provision is aimed at profitable enterprises, i.e., companies with positive net profits for the latest fiscal year and positive undistributed profits at the end of the year for the parent company.
Investors have shown great interest in these new rules, expressing concerns about whether the listed companies they hold will be ST-labeled, and have initiated discussions on various communication platforms. At the same time, some misunderstandings have occurred in the market, such as the notion of “delisting if not paying dividends.” In this context, some small-cap stocks have shown weakness, with indices such as the Wind Microcap Index, as well as the CSI 2000 and CSI 1000, experiencing declines to varying degrees.
Guo Ruiming, the director of the Listing Department of the CSRC, clarified that a company being labelled with ST (Special Treatment) simply because it has not met the dividend criteria does not mean that it will be delisted. Once specific conditions are met, listed companies can apply to revoke the ST status. According to data forecasts from 2020 to 2022, the number of listed companies that may be affected by this new standard is just over 80.
As the CSRC continues to strengthen the guidance on profit distribution, the dividend plans for listed companies in 2023 are receiving more attention. “Caijing” magazine, based on data from Wind, found that as of April 24th, 3377 A-share companies have announced their 2023 annual reports, of which 2633 have proposed cash dividend plans, accounting for nearly 80% of the total, indicating that cash dividends have become a universal phenomenon in the annual profit distribution of A-share companies. The total amount of dividends planned by these companies reaches 1.62 trillion yuan, with the number of companies exceeding 10 billion yuan reaching 24.
Looking at individual stocks, there are 33 companies that have announced dividends (including taxes) of more than 2 yuan per share. Some leading companies in certain industries have also proposed quite generous dividend plans, including Contemporary Amperex Technology, BYD, ZTE, NAURA Technology Group, Kingsoft Office, and Foxconn Industrial Internet, with their dividend amounts for 2023 reaching historical highs. Meanwhile, companies that have not distributed dividends in the past five years, such as Fushun Special Steel, Anfu Technology, Zhejiang Seaport, and Beijing Capital Agribusiness Group, have also recently announced their profit distribution plans. However, some companies, despite having significant undistributed profits, have still not given out cash dividends, which has also attracted widespread attention in the market.
Zhao Xijun stated that it is indeed puzzling to see companies in the stock market that do not distribute dividends over the long term. The securities market should not only serve for corporate financing but should also be responsible to investors, creating value and providing dividends.
In addition to regulating listed companies, the newly introduced “Guo Jiu Tiao” policy also sets requirements for key market participants, emphasizing the strengthening of regulation over securities and fund institutions, and advocating for the industry to focus on core businesses and enhance their strength. These policies suggest that industry institutions should establish the correct business philosophy, reasonably handle the relationship between profitability and functionality.
To strengthen the regulation of all aspects of industry institutions and comprehensively improve the regulatory level and efficiency, relevant departments have issued a series of new policies. These policies aim to strengthen the system management of industry institution shareholders and business practices, and continuously improve the qualifications and record management of senior managers. At the same time, the regulatory framework has also been reformed and improved for key businesses such as derivatives and margin financing.
The policies encourage industry institutions to enhance their investment banking capabilities and wealth management structure through mergers and acquisitions, organizational innovation, and by increasing their core competitiveness. In addition, small and medium-sized institutions are encouraged to develop differentiating strategies and adopt characteristic business models.
The current regulatory bodies in the industry, such as the Securities Regulatory Commission, have issued the “1+N” policy framework and related supporting documents, aiming to further strengthen supervision and promote the construction of first-class investment banks and investment institutions. Specifically, the Securities Regulatory Commission proposed a total of 25 guidelines and measures in seven major areas in the relevant documents.
According to the future development roadmap, the goal is to construct about ten high-quality leading institutions to drive the high-quality development of the industry within approximately five years. Furthermore, by 2035, it is anticipated to cultivate two to three investment banks and investment institutions with international competitiveness, until the mid-21st century when a world-leading modern securities and fund industry is developed.
In fact, in the current assessment of the industry by experts, the number of Chinese listed securities companies has reached 43, playing a key role in the industry due to their size and influence. However, these institutions still have room for improvement, such as development concepts, investor protection, internal control governance, and information disclosure, where they significantly lag behind top-tier investment banks.
A research report from Guosen Securities points out that driven by the new policies, the securities industry will undergo significant reform. The industry concentration will be enhanced, institutional pricing power will be strengthened, asset management indexation will be intensified, and regulatory requirements will be raised accordingly. The industry is expected to optimize and evolve, promoting its own high-quality development and becoming the “engine” of new momentum.
With the support of the regulatory layer, top securities firms will become even more powerful, while small and medium-sized firms will face significant challenges, especially in areas such as IPO issuance. Analyses suggest that small and medium-sized securities firms should focus on resource matching and facilitating transactions, with a possible key direction for development being to revolve around listed companies and state-owned enterprise businesses.
Furthermore, the “Opinions” also clearly point out the need to improve the compensation management system that is compatible with performance, business nature, contribution level, compliance risk control, and social culture. At the same time, the Securities Regulatory Commission revised the “Provisions on Strengthening the Supervision of Listed Securities Companies,” through which more robust supervision helps leading securities companies drive high-quality development in the industry.
The new policy focuses on the full-chain responsibility of issuing and listing to build a fair, transparent, and stable market environment and promote high-quality developments in the capital market. Industry experts emphasize that securities companies should deepen their business foundations, focus on their main businesses, actively improve risk control and compliance capabilities, and persist as gatekeepers of the capital market. In addition, companies need to strategically consider national strategies and corporate development and precisely formulate IPO and refinancing plans.
Under the push of reform to decrease fees, the public mutual fund industry is facing new development directions. Effective measures are already underway, among which the newly introduced “National Nine Articles” policy is most significant. It will greatly promote the development of equity-oriented public mutual funds, clearly proposing to significantly increase the proportion of equity funds in the market and to create a fast approval channel for exchange-traded open-end index funds (ETFs), advancing the development of index investing.
The new policy also focuses on strengthening the investment research capabilities of fund companies, encouraging the diversification of products and investment strategies, thereby attracting investors. This is an important step in the shift from focusing on scale expansion to pursuing investor returns, including gradually reducing the overall fees of public mutual funds and standardizing and researching the compensation system for fund managers. Furthermore, the purpose of revising the classification evaluation system for fund managers is to emphasize the investment philosophy of rational investment, value investment, and long-term investment.
On the other hand, the “Guo Jiu Tiao” policy also involves the regulation of trading activities; measures to strengthen the supervision of high-frequency quantitative trading are being vigorously advanced. The Securities Regulatory Commission has recently publicly sought social opinions on relevant management regulations, and exchanges are also emphasizing that they will quickly introduce supporting self-disciplinary regulatory rules. These measures include improving the monitoring standards for programmatic trading, promoting the transaction reporting of Shenzhen-Hong Kong Connect investors, and enhancing the management of high-frequency trading investors.
The head of Market Regulation Department I of the Securities Regulatory Commission stated: Implementing differentiated supervision on high-frequency trading does not mean rejecting this method of trading, nor does it imply a hands-off approach. Instead, through targeted regulatory arrangements, it aims to curb the excessive advantage of high-frequency trading on one hand, maintain market order and fairness, and on the other hand, enhance system security and stability and regulate high-frequency trading behavior, to promote the healthy and sustainable development of the capital market.
Market participants generally believe that the implementation of a differentiated fee strategy for high-frequency traders not only shows the regulatory authorities’ open attitude towards quantitative funds but will also help the capital market find a new balance point between efficiency and volatility. In the long term, this is expected to have a positive impact on market stability and volatility, and the reduction of high-frequency strategies is seen as a future trend.
Looking back at the history of A-shares, we find that the previous two implementations of “Guo Jiu Tiao” triggered bull markets. Between 2006 and 2007, the Shanghai Composite Index once exceeded 6,000 points; a significant bull market also emerged in 2015. Similarly, whether the new “Guo Jiu Tiao” can start a new round of bull market has attracted widespread attention. The characteristics of these policies are that they are implemented during relatively sluggish market periods, with the core focus on strengthening regulation, preventing risks, guiding the capital market towards transformation for long-term and robust development, aiming to improve the overall quality of the capital market rather than pursuing short-term rapid growth.
According to research reports from Zhongtai Securities and other brokerages, the trading habits and investment strategies of active funds in the market, especially those of private equity funds, may face significant changes. Against this backdrop, “stable assets” like dividends are becoming unprecedentedly important. Some brokerages even suggest that, under the promotion of the new “Guo Jiu Tiao,” the era of dividends has arrived, indicating the start of a slow and steady bull market.
Changjiang Securities analysis believes that the A-share market will be more inclined towards a dividend yield-based investment system in the future. If companies in the “core asset” categories, such as consumption, media, electronics, etc., commonly known as “white horse stocks,” can increase their dividend payout rate and achieve a transition from “white horse” to “red horse”, this will help stabilize stock prices and drive the strength of the related sectors.
At the same time, the attitude of buyer institutions such as public funds towards dividend assets is showing a subtle complexity. In the first quarter before the new “Guo Jiu Tiao” was announced, due to the market’s risk-averse sentiment, investment in the dividend style had reached a new height. Some fund managers accustomed to investing in growth stocks were not interested in dividends but didn’t want to miss out on the opportunities, so they adopted the strategy of “investing in AI (growth stocks) on one hand and in dividends on the other.”
According to the data from GF Securities, in the first quarter of this year, public funds have obviously increased their positions in sectors with supply-side barriers, improved industry layouts, and steadily rising ROE of high-dividend industries. These include global resource goods, coal, power, white goods, railways highways, papermaking, panels, publishing, and operators, among which the allocation proportions for oil and copper have reached new highs since 2010 and have become over-weighted.
Facing the comprehensive bullish trend of dividend style, many fund managers have started to shift their research focus to “shareholder-friendly companies”, “high-dividend companies”, and “state-owned enterprises that they seldom invested in before.” They found that in every round of price fluctuations, some assets become more expensive because they fit the context of the era. Therefore, they concluded that investment opportunities should not be evaluated solely based on historical valuation, which is like “seeking the sword cut into the boat”.
Conversely, some fund managers remain skeptical about the dividend trend, especially those who pursue growth stocks and the “stars and seas”. A growth-style fund manager told Caijing that the dividend trend has lasted for two to three years, and he believes that it is not at the beginning stage but closer to the end. He emphasized that manufacturing companies occupy a large proportion of the A-share market, and for the manufacturing sector, high dividends might not be sustainable, and excessive dividends could sacrifice the future competitiveness of the enterprise.
Nevertheless, some views are more optimistic. For instance, Liu Yanchun, a fund manager at Invesco Great Wall, points out that the market’s pessimism might lead to sustained appeal for low-volatility dividend assets, but given that the economic data has actually exceeded market expectations, there is no need to overly concentrate on sectors with short-term economic weakness, while also recognizing the solid foundation of China’s economy and not being overly pessimistic.
Qiu Dongrong, a fund manager at Zhonggeng Fund, states that not all high-dividend strategies can bring high returns in the long term. What is important is to focus on the fundamentals and pricing. High returns from high-dividend strategies are very likely to come from the overlay of other factors, not just from a simple low-risk strategy. Investors tend to reinforce seemingly successful strategies and habitually engage in linear trading, ignoring the accumulation of substantial risks including cyclical risks, growth potential, capital supply, or innovation, all of which may challenge the effectiveness of high-dividend strategies.
In the eyes of financial market analysts, investors should not overemphasize the importance of short-term dividend yields, but should pay more attention to the ability of enterprises to pay dividends in the long term. As the growth rate of China’s economy enters a new norm, influenced by regulatory aspects and public opinion, an increasing number of listed companies are beginning to value shareholder returns and consider it as a key business strategy, a trend that is positively evaluated by the industry.
Fund managers point out that although the market style may sometimes become excessively hot in phases, the positive change in attitude towards shareholder distribution actions in the business world implies that the capital market ecology will undergo significant and positive transformation.
Today’s topic: Do you think the new policy direction can give rise to a new bull market? Feel free to share your views in the comment section.
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