Chinese Stock Market Regulator Says Low Valuation, Low Margin, Low Foreign Participation Explains Lower Volatility

iFeng: 证监会回应六大市场热点！估值处于历史低位、外资占比不足4%

Li Chao, vice chairman of the China Securities Regulatory Commission, said today that since the normal opening of the A-share market after the Spring Festival, government departments have played the role of market mechanisms without administrative intervention, and the market's self-regulating function has been better exerted, compared with overseas capital markets. China's capital market has shown strong resilience and anti-risk capabilities. At present, market liquidity is reasonable and abundant, and valuations are at historically low levels. Generally speaking, the impact of the external environment is phased and will not change the stability and improvement of China's capital market. the trend of.

Does anyone think China's government left the market to its own devices?

There are some reasons why the market has held up better, mainly for the reason shown in the chart above: the A-share market is still in a bear market and is sitting near major support. This has taken leveraged, foreign and speculative capital out of the market:

□ The capital market has reduced the level of market capital leverage, and the total amount of leveraged funds has decreased by 80% compared to the peak in 2015.

□ Equity pledge risk The measures of reducing stocks and controlling increase were adopted, and the number of listed companies with a high proportion of pledges decreased by one third compared with the peak period.

□ The direct impact of fluctuations in the international financial market on China's market is mainly in two aspects: investor psychology and capital flow. At present, investors are generally stable and rational, and the total amount of foreign capital flows is not large.

□ At present, foreign capital accounts for less than 4% of the circulating market value of A shares, and the proportion of transactions is not large. The flow of foreign capital has disturbed the A-share market, but there is no subversive and fundamental impact.

According to CSRC, 98% of listed company workers have returned to work and more than 80 percent of listed SME employees.

□ A quick survey of 2,700 listed companies shows that the return rate of listed companies has exceeded 98%, and the return rate of employees of small and medium-sized listed companies has exceeded 80%.

□ The CSRC has conducted research and demonstrations on the GEM reform and solicited opinions within a certain range. The GEM reform will focus on the main line of registration system reform, and related work is progressing in an orderly manner.

□ The reform and opening up of the capital market will not be affected by the epidemic situation. We will vigorously promote the implementation of the "Twelve Reforms" and vigorously promote reform and opening up.

Li Chao says stocks are cheap:

Point five: The overall valuation of A-shares is low and liquidity risk is relatively low

According to Li Chao's analysis, compared with the overseas market, the A-share market has shown less volatility in the near future, showing stronger resilience, mainly due to two reasons.

First, from the perspective of the internal structure of the A-share market, the overall market valuation is relatively low. At present, the price-earnings ratio of the Shanghai Composite Index is no more than 12 times, and the price-earnings ratio of the Shanghai Stock Exchange 50 is less than 9 times. Historical vertical comparisons are at a relatively low level. The value of A-share investment appears, liquidity is abundant, and the risk is relatively low.

Second, from the perspective of the macroeconomic environment, China ’s epidemic prevention and control is at a different stage compared with countries in overseas markets. At home, the impact of the new crown pneumonia epidemic on the capital market is gradually being digested, and companies are returning to work and production. Beyond 98%, the situation of small and medium-sized enterprises is also relatively optimistic. The survey data of the China Securities Regulatory Commission on small and medium-sized listed companies shows that the return rate of employees of these companies exceeds 80%.

Li Chao said that these two factors have released positive signals. Generally speaking, the macro economy also has a foundation for rapid recovery.