High-quality development to boost capital market

陈小将

Major advances key to improving competitiveness of A-share companies

Investment in China's A-share market has been challenging in recent months despite the nation's economic recovery.

Indexes have fluctuated significantly and there have also been rapid changes in sectors leading market rallies and downturns.

Such volatility has been noted by regulators. Early last month, Yi Huiman, chairman of the China Securities Regulatory Commission, or CSRC, the country's top securities watchdog, said that to secure market order, a close eye would be kept on insider trading and market manipulation.

Yi was speaking in Shanghai at the annual Lujiazui Forum, a high-level platform for government officials, global financial leaders and outstanding scholars to discuss and foster international financial cooperation, and further financial reform and market opening in China.

A-shares are those of incorporated companies based on the Chinese mainland that are listed on either the stock exchanges in Shanghai or Shenzhen, Guangdong province, and also in Beijing.

Regulatory supervision aside, the performance of the A-share market is worth a closer look, especially when compared with those of other markets.

The benchmark Shanghai Composite Index has remained basically flat during the past six months. It has fallen by nearly 6 percent from its peak of 3,395 points reached in early May. Meanwhile, the Shenzhen Component Index has shed 9 percent from this year's peak of 12,158 points.

In Hong Kong, the Hang Seng Index has been just as sluggish, falling by some 17 percent from this year's height of 22,688.9 reached in late January.

But during this time, a totally different story has emerged in other major markets around the world, despite soaring inflation, rising interest rates and pressure from economic downturn.

In the United States, the Nasdaq has surged by 30 percent this year. In Japan, the Nikkei 225 has risen by more than 27 percent, repeatedly setting records. In mid-May, the index topped 30,000 points, the highest level since Japan's economic bubble burst in 1989. On Monday, the index stood at more than 33,700 points.

Analysts at Zheshang Securities said the bullish performance in Japan is due to the country's relaxed monetary environment.

Thanks to a low benchmark interest rate, with the 10-year government bond yield set at 0 percent, foreign investors have bought Japanese stocks with financing obtained from local banks. The investors calculate that the yield generated from stock investment will be higher than banks' interest rates. Their bulk purchases of Japanese stocks have pushed up asset prices, resulting in the Nikkei 225 rally, the analysts said.

At China International Capital Corp, or CICC, analysts said better-than-expected fiscal results of leading technology companies have led to the Nasdaq's strong performance in past months.

Effective headcount reductions, combined with the stimulus provided by quickly rising emerging industries such as artificial intelligence, have armed technology giants with more risk resistance. Under the scenario of a mild economic recession in the US, the technology sector, which earlier saw a price adjustment, will face less downward pressure, the analysts said.