The China Securities Regulatory Commission (CSRC) is soliciting public opinions on the ‘Guidance for the Supervision of Listed Companies No. 10 – Market Value Management (Draft for Comments)’. According to the CSRC’s official website, in order to implement the ‘Several Opinions on Strengthening Regulation, Preventing Risks, and Promoting High-Quality Development of the Capital Market’ (State Document No.
2024-10), and to further guide listed companies to focus on their own investment value and to effectively enhance investor returns, the CSRC has drafted the ‘Guidance for the Supervision of Listed Companies No. 10 – Market Value Management (Draft for Comments)’ (hereinafter referred to as the ‘Guidelines’). The ‘Guidelines’ call for listed companies to improve the quality of their operations, enhance operational efficiency and profitability, and, in accordance with actual conditions and in compliance with laws and regulations, employ mergers and acquisitions, equity incentives, cash dividends, investor relations management, information disclosure, share repurchase, and other methods to promote the investment value of listed companies. The ‘Guidelines’ clarify the responsibilities of the board of directors, directors, senior management, controlling shareholders, and other relevant parties of listed companies, and make specific requirements for the disclosure of market value management systems by major index constituent companies and the disclosure of valuation enhancement plans by companies that have been trading below net value for a long time. At the same time, the ‘Guidelines’ explicitly prohibit listed companies from engaging in illegal and non-compliant activities under the guise of market value management. Valuable opinions from all market participants are welcome. The CSRC will revise and improve the ‘Guidelines’ further based on the public comments received and then release them for implementation. Article 8 of the ‘Guidelines’ stipulates that major index constituent companies should formulate and disclose a market value management system after it has been reviewed by the board of directors, specifying at least the following matters: (1) the specific department or personnel responsible for market value management; (2) the responsibilities of directors and senior management; (3) the internal assessment and evaluation methods of the listed company; (4) the specific monitoring and warning mechanism arrangements for the listed company’s market value, price-to-earnings ratio, and price-to-book ratio, as well as the industry average levels of the aforementioned indicators; (5) the response measures when the listed company’s stock price experiences a short-term consecutive or significant decline. Major index constituent companies should provide a special explanation of the implementation of the market value management system during their annual performance presentations. Short-term consecutive or significant declines in stock prices refer to: ① a cumulative decline of 20% in the closing price of the listed company’s stock within 20 consecutive trading days; ② the closing price of the listed company’s stock being below 50% of the highest closing price of the stock in the past year; ③ other situations stipulated by the stock exchange. The original text of the draft for comments is as follows:Related reports
Authoritative interpretation: The first market value management guidelines for A-shares are about to be released, with significant responsibilities for index constituent stocks and net-breaking stocks. Long-term net-breaking stocks become a ‘focus point’ of market value management policies. Currently, 88 companies are breaking net with a dividend yield exceeding 5%, and over 1300 companies have a dividend yield exceeding 2%.
Which companies possess a strong incentive for market value management? In the financial sector, a significant 25% of companies are recognized for their robust market value management strategies. These companies are typically characterized by their proactive approach to enhancing shareholder value and ensuring long-term growth.
Several factors contribute to a company’s strong market value management motivation. These include a clear understanding of their market position, effective capital allocation, and a commitment to transparency and communication with investors. By focusing on these areas, companies can maximize their market capitalization and attract more investors.
Investors often look for companies with a strong market value management approach as it indicates a well-managed and growth-oriented business. Companies that excel in this area are likely to see an increase in their stock prices and overall market value over time.