Since the concept of market value management was first proposed in 2005, it has witnessed the profound changes in China's capital market and the solid pace of reform of state-owned enterprises (SOEs) over the past 20 years.
With the comprehensive promotion of the market value management assessment by the State-owned Assets Supervision and Administration Commission of the State Council, many central state-owned enterprises have taken active action, and the market has also responded positively, and the resonance of enterprise value and market value can be heard clearly. The reporter of this newspaper observes this new phenomenon from the four perspectives of new mission, new strategy, new adjustment, and new influence, and looks forward to the readers' continued attention.
The 2023 annual reports of listed companies, which are nearing the end of their release, have become an excellent window to observe the market value management strategies of central state-owned enterprises.
A number of listed companies controlled by state-owned enterprises have said that they have taken market value management as a key indicator and formally included it in the assessment system of enterprises.
The market value management of central state-owned enterprises is standing at a new historical node, meeting unprecedented development opportunities and challenges.
A new mission
Since the beginning of this year, the State-owned Assets Supervision and Administration Commission of the State Council has repeatedly "pointed" market value management, and the market value management of central state-owned enterprises has once again been pushed into the spotlight.
On January 24, the State-owned Assets Supervision and Administration Commission of the State Council announced that it would incorporate the effectiveness of market value management into the assessment of the heads of central enterprises.
On January 29, the State-owned Assets Supervision and Administration Commission of the State Council said that it would fully implement the assessment of "one enterprise and one policy" and comprehensively promote the market value management assessment of listed companies.
Regulators are also taking action. In March, the China Securities Regulatory Commission (CSRC) issued the "Opinions on Strengthening the Supervision of Listed Companies (Trial)", which proposed six measures around market value management, including consolidating the main responsibility of listed companies for market value management, improving the effect of share repurchase and regulatory binding.
The new "National Nine Articles" issued in April provide new policy support for the market value management of central state-owned enterprises, and clearly propose to formulate guidelines for the market value management of listed companies. It has studied the inclusion of the market value management of listed companies in the internal and external assessment and evaluation system of enterprises, and strictly cracked down on market manipulation, insider trading, and other violations of laws and regulations in the name of market value management.
Zhu Pingfang, director of the Market Value Management Research Center of the Shanghai Academy of Social Sciences, told the International Financial News that the valuation level of central enterprises in the capital market should match their status in the mainland economic system, and market value management is an important starting point. The mission of central state-owned enterprises has expanded from leading high-quality economic development to leading the capital market to form values with Chinese characteristics.
In Zhu Pingfang's view, the market value management of central state-owned enterprises reflects the transformation of the SASAC from "managing assets" to "managing capital", from ensuring the payment of profits and taxes to ensuring the stability of market value and the growth and expansion of market value, which can effectively enhance the intrinsic value of enterprises, enhance the core competitiveness of enterprises, and reflect the real results of state-owned enterprise reform and transformation, which not only conforms to the changes in the market environment, but also achieves the goal of protecting the interests of shareholders and responding to national policy guidance. The core of the market value management of central state-owned enterprises is to enhance the intrinsic value and core competitiveness of enterprises through systematic and scientific strategies, and realize the matching of market value and intrinsic value.
For some time, under the guidance of the Three-Year Action Plan for the Reform of State-owned Enterprises (2020-2022), the fundamentals of state-owned listed enterprises have been greatly improved, but in contrast, the valuation of companies has not increased significantly.
Xu Chi, chief analyst of Zhongtai Securities Strategy, analyzed that the low valuation and low financing efficiency of central state-owned enterprises in the capital market have become one of the important factors hindering state-owned capital and state-owned enterprises from becoming stronger, better and bigger. As high-quality social assets, state-owned enterprises should play their greatest role. In the context of the sharp rise in the financial pressure of local governments, the revitalization of state-owned assets is of great practical significance.
Xu Chi believes that in order to revitalize the high-quality assets of state-owned enterprises and boost state-owned enterprises to become bigger and stronger, we must first increase the value recognition of central enterprises in the capital market, so as to lead the value recognition of social capital to central enterprises. On the one hand, market value management can effectively reduce the refinancing cost of listed companies. Generally speaking, good market value management can help listed companies gain investor recognition, which is conducive to reducing financing costs and raising the issuance price when listed companies refinance, including lowering the threshold for bank loans when carrying out debt financing. On the other hand, a better market capitalization can improve the company's visibility, bargaining position and premium ability.
New strategy
It can be clearly observed from the 2023 annual report that market value management has jumped to an important part of the 2024 strategic plan of some central enterprises.
For example, China Shenhua pointed out in its 2023 annual report that the company will formulate an action plan for increasing the market value of active expectation management in 2024, study and set a "3+4" expectation management index system, scientifically formulate a cash dividend policy and implement dividends beyond the plan, and further improve the level of market value management.
CCCC Design said that in 2024, the company will focus on capital operation, strengthen market value management, and actively reward shareholders. We continued to optimize the shareholder structure and actively introduced strategic investors. In a timely manner, we should use stock holdings, repurchases and other means to manage share capital, carry out asset income collection and dividends, establish a reasonable dividend system, formulate scientific business portfolio objectives, attract long-term value investment from institutional investors such as public funds and social security funds, and guide the value of listed companies to return reasonably.
COSCO SHIPPING Development also said that in 2024, it will strengthen market value management, and further advance value transmission and realization. The company will further promote the improvement of the quality of listed companies, actively maintain the performance of the capital market, and strive to promote the company's market value to match the intrinsic value. While continuing to standardize corporate governance and enhance the endogenous power of the enterprise, we will optimize and improve the communication and transmission mechanism with the market, and further enhance market recognition based on the needs of investors.
At the same time, judging from the content of the institution's research on central state-owned enterprises, its attention to market value management has also increased.
Since the beginning of this year, a number of central enterprise holding companies such as China Jushi, China Railway Industry, Great Wall Securities, and China Merchants Highway have stated in the survey that they have included market value management in their assessments.
Among them, China Merchants Highway said in an institutional survey that the company formulated the annual "Market Value Management Plan" and "Shareholder Return Plan" at the beginning of 2023, promising to increase the cash dividend ratio in the next three years to no less than 55% of the net profit attributable to the parent company in the current year, and to convey the company's value concept by carrying out investor relations management.
What other aspects should the central state-owned enterprises be listed on?
Zhu Pingfang believes that efforts should be made mainly from the aspects of enterprise value management and investor relations management. First, we must do a good job in value creation. Through strategic planning, increasing R&D and innovation, and optimizing business models, we will enhance our core competitiveness, enhance profitability and market position. By optimizing corporate governance, improving the quality of information disclosure, reducing information asymmetry, strengthening communication with the market, and enhancing the market's understanding and recognition of corporate value, we must do a good job in value management. Absorb and learn from existing experience, actively explore new ways, and achieve the integration of market value and value through cash dividends, share repurchase and increase, equity incentives or employee stock ownership, mergers and acquisitions, etc.
"At the same time, the central state-owned enterprises need to do a good job in risk management, but also do a good job in investor management, block the malicious speculation of the central state-owned enterprises listed companies in the secondary market, prevent the volatility risk of the market value of the listed companies of the central state-owned enterprises, and promote the continuous growth of the market value of the listed companies of the central state-owned enterprises. Zhu Pingfang also reminded.
New adjustments
Drawing on the experience of overseas market value management, mainland market value management is standing at a new starting point full of potential and has a broad space for development. With the deepening of the reform of state-owned enterprises and the gradual maturity of the capital market, it is expected that the market value management of central state-owned enterprises in mainland China will move towards a deeper optimization and improvement.
After a comparative analysis of the use of the three commonly used market value management tools in the world's major markets, such as dividends, buybacks, mergers and acquisitions, Huatai Securities found that compared with developed markets, mainland central state-owned enterprises are still lacking in the use of market value management tools, and they are often foggy in practice. Although the intensity and breadth of dividends of central state-owned enterprises are quite large, the sustainability of dividends and financial support still need to be improved, and there is more room for the use of market value management tools such as repurchases, increased holdings, and mergers and acquisitions.
At present, the central state-owned enterprises have shifted from the planning stage to actual operation in the management of market value, and have achieved initial results. However, in practice, there are still some challenges in the market value management of central SOEs.
Xu Chi believes that from the perspective of the value of the enterprise itself, the current return on assets (ROA) and return on equity (ROE) of mainland central enterprises are lower than those of other listed companies, and the efficiency of income generation is low. Moreover, due to the long-term dependence on debt investment, equity management is relatively solid, and the asset-liability ratio is relatively high. In addition, the R&D investment of central enterprises also needs to be further improved.
From the perspective of value discovery, state-owned listed companies in mainland China are often limited to traditional market development and entity operation and sales in the process of operation. Not enough attention has been paid to investor relations management and capital operation. Xu Chi said, "The lack of active communication with investors has led to a lack of understanding of the fundamentals of state-owned listed companies, state-owned enterprise reform, scientific and technological innovation and other changes." Even if these listed companies create value, they will not be able to realize the value they create in the capital market."
From the perspective of the market, Xu Chi said that the existence of problems such as fluctuations in the valuation of the domestic capital market, the failure to give full play to the market value discovery function, and the long-term undervaluation of listed companies of central state-owned enterprises are closely related to the structural characteristics of investors with a high proportion of small and medium-sized investors. The mainland's capital market started late and developed rapidly, and even some institutional investors did not firmly establish the concept of value investment, and were keen to chase market hotspots, and the characteristics of "retail" were obvious, which greatly hindered the market's value discovery of high-quality state-owned listed companies. Securities companies and other intermediaries should do a good job in investor education and encourage more funds to be allocated to high-quality industries that conform to the valuation system with Chinese characteristics.
New impacts
Looking ahead, what will be the impact of the deepening of market value management on the market and investors?
Zhu Pingfang believes that in the future, as the entrance to IPOs becomes stricter and delisting becomes the norm, investment in listed companies of central state-owned enterprises will become a theme investment. The improvement of the status of central state-owned enterprises in the capital market and the deepening of their market value management can better cope with market fluctuations and uncertainties, and are expected to play a more important role in the stability of the capital market. At the same time, the deepening of market value management can force the optimization of market structure, guide the flow of resources to more efficient and valuable areas, stimulate the innovation and competitiveness of enterprises, promote the layout and development of enterprises in new technologies, new industries, new formats and other fields, and bring more growth points to the market. In addition, the deepening of market value management will also help protect the legitimate rights and interests of investors, which will enhance investors' confidence and participation and promote the healthy development of the capital market. Of course, in the process of building a capital market with Chinese characteristics, investors should adapt to this change, adjust their investment strategies, and follow the trend.
Xu Chi said that with the deepening of market value management, listed companies are expected to improve the quality and frequency of information disclosure, which can enable investors to more accurately assess the value of the company, thereby improving the efficiency of the capital market. At the same time, more transparent information disclosure can reduce information asymmetry and enhance market confidence.
Talking about the development trend of market value management of central state-owned enterprises, Xu Chi pointed out that the inclusion of market value management in the performance appraisal of the heads of central enterprises will effectively enhance the determination and motivation of the management of state-owned enterprises to carry out market value management and restore the valuation of state-owned enterprises.
In Xu Chi's view, in the future, the market value management of central state-owned enterprises will take into account two development directions at the same time: on the one hand, in the context of a new round of state-owned enterprise reform, state-owned enterprises will continue to improve their profitability, enhance the core competitiveness of enterprises, and improve the quality of listed companies; Organizational research and other ways to convey information to the outside world, as well as strengthen information disclosure, and accurately convey the company's information to investors.
"In the long run, the key to state-controlled listed companies is to practice their internal skills, improve their fundamentals, deepen the reform of state-owned enterprises, enhance their core functions, and improve their core competitiveness. Wu Gangliang, a researcher at the China Enterprise Reform and Development Research Association, emphasized his views to reporters.
Reporter Wei Lai
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