Chinese authorities vow stronger measures to bolster stock market, with sufficient policies in toolkit

China's benchmark Shanghai Composite Index posted a V-shaped rebound on Wednesday after the securities regulator vowed to strengthen investor protection and oversight of listed companies. Analysts said that Chinese authorities have the confidence and resolve to maintain the healthy and steady development of the country's financial sector, with sufficient policies in their toolkit.

The Shanghai Composite Index closed up 1.8 percent as it regained the psychologically important 2,800-point level, reversing a drop of 0.15 percent in the morning session. The Shenzhen Component Index rose 1 percent to 8,682.19 and the tech-heavy ChiNext index was up 0.51 percent at 1,696.19.

More than 4,000 stocks across the market rose, led by shares related to finance, state-owned enterprises and real estate.

The rally of the A-share market came as multiple government agencies vowed to take measures to prop up the capital market.

On Monday, an executive meeting of the State Council pledged "stronger, more effective measures" to stabilize the market and improve investor confidence.

Wang Jianjun, vice chairman of the China Securities Regulatory Commission (CSRC), said in a media interview on Wednesday that the commission was taking steps enacted at the key meeting to ensure the healthy and stable development of the capital market.

"We will make more efforts to put investors' interests first. Only by offering sound protection to investors can the capital market have the roots for prosperity. We will embed this idea into the whole process of market system design and regulation enforcement," Wang said.

Zhang Wangjun, another CSRC official, said on Tuesday that more will be done to reform the investment side of the capital market, promote counter-cyclical investment by institutions, and improve the investment channels of social security funds, insurance funds and annuity funds in a bid to foster long-term stable investment forces, the Xinhua News Agency reported.

An official of the State-owned Assets Supervision and Administration Commission of the State Council said on Wednesday that the bureau plans to include valuation management in the performance assessments of the leaders of centrally administered state-owned enterprises, in order to make them pay more attention to their stock performance and better reward investors through measures such as stock buybacks and cash dividends.

The authorities' intensive expressions of support for the stock market show that the government has the confidence and resolve to prop up the market and ensure its stable and healthy development in the long run, Dong Shaopeng, a senior research fellow at the Chongyang Institute for Financial Studies at the Renmin University of China, told the Global Times on Wednesday.

Dong called for decelerating the approval of IPOs and strengthening the regulation of IPO underwriters so as to enhance the quality of listed companies. With a focus on the in-depth reform of the capital market, the authorities should boost the restructuring of the A-share market ecosystem, guided by the implementation of an across-the-board registration-based IPO system, according to Dong.

The A-share market has continued its decreasing trend, which should be reversed by large-scale capital inflows and stepped-up macroeconomic policies, Yang Delong, chief economist at Shenzhen-based First Seafront Fund Management Co, told the Global Times on Wednesday.

In 2024, the authorities need to roll out more policies to further strengthen the vitality of the economy. Once the economy further stabilizes, listed companies' profits will increase accordingly, Yang said, calling for patience and confidence in China's stock market.

With the continuous upswing in the country's economic recovery, bearish news will fade away. As a result, the stock market is expected to stabilize and return to normal operations, Dong said.

Pan Gongsheng, governor of the People's Bank of China, the country's central bank, said on Wednesday that the central bank will cut the reserve requirement ratio for financial institutions by 0.5 percentage points from February 5, injecting further strong impetus into the market.

Bloomberg reported on Tuesday that Chinese authorities are seeking to mobilize about 2 trillion yuan ($278 billion), mainly coming from offshore accounts of state-owned enterprises, as part of a stabilization fund to buy shares onshore through the Hong Kong exchange link.

Despite recent volatility in the A-share market, analysts remain confident in its long-term performance.

The Chinese stock market has become one of the most attractive in the world in terms of valuation. The overall valuation of A-shares is about half the level of companies listed in the US market, Zhu Liang, chief investment officer of AllianceBernstein's office in China, said in a note sent to the Global Times on Tuesday.

China is the world's largest trading country and its capital market is a venue that could provide good yields. Investors across the globe are quietly paying attention to the A-share market, Zhu said.

In 2024, listed Chinese companies are expected to achieve growth in earnings per share of about 17 percent, Zhu said.