As a professional term in the financial field, the Politburo of the Central Committee first mentioned "strengthening patient capital" at the meeting. Scientific and technological innovation requires long-term financial support, and this paper focuses on analyzing the position of patient capital from the perspective of strategic emerging industries.
Securities Times reporter Zhang Juanjuan
The recent meeting of the Political Bureau of the CPC Central Committee stressed the need to develop new productive forces in accordance with local conditions; It is necessary to strengthen the layout of national strategic scientific and technological forces, cultivate and expand emerging industries, advance the layout and construction of future industries, and use advanced technology to empower the transformation and upgrading of traditional industries; It is necessary to actively develop venture capital and expand patient capital.
As early as July 2023, the State-owned Assets Supervision and Administration Commission of the State Council pointed out that it is necessary to promote the concentration of state-owned capital in forward-looking and strategic emerging industries, and be a good "long-term capital", "patient capital" and "strategic capital". In December 2023, the Party Committee (Enlarged) Meeting of the China Securities Regulatory Commission pointed out that it will vigorously promote the reform of the investment side, promote and improve the policy environment conducive to the entry of medium and long-term funds into the market, and guide investment institutions to strengthen the counter-cyclical layout and strengthen patient capital.
What is "patient capital", Guosen Securities pointed out that patient capital values long-term value and can be mainly classified as organizers who play a leading role in long-term investment, and these types of funds play a strong and stable role in the capital market. Chen Guo, chief strategy officer of China Securities Securities, believes that patient capital is capital that can withstand short-term fluctuations or drawdowns, including social security funds, basic pensions, enterprise annuities, occupational annuities, industrial capital, and individual investors with long-term investment concepts.
Referring to the experience of overseas markets, the development and expansion of patient capital will help increase the proportion of professional investors in the capital market and establish the concept of value investment. It will help stabilize market expectations and boost investor confidence; It will help technology enterprises obtain long-term and stable financial support.
for strategic emerging industries
The scale of shareholding is expanding
Scientific and technological innovation is the source of new quality productivity, because of the long cycle of technological innovation and high risk, so it is more necessary to have long-term thinking of patient capital to provide stable financial water. From the perspective of shareholdings, the scale of patient capital's shareholding in strategic emerging industry companies is increasing.
Since 2000, value investors represented by social security funds, pensions and enterprise annuities, "national teams" dominated by securities companies, Huijin companies and investment companies under the State Administration of Foreign Exchange, and foreign capital represented by qualified foreign institutional investors (QFII) have entered the A-share market one after another.
According to the Classification of Strategic Emerging Industries (2018) of the National Bureau of Statistics, as of the latest update, there are 1,828 A-share companies belonging to strategic emerging industries (hereinafter referred to as "strategic emerging companies"), mainly distributed in machinery and equipment, electronics, medicine and biology, computers, power equipment and other industries. According to the statistics of the top ten circulating shareholders, strategic emerging companies have been accompanied by patient capital for more than 10 years.
From the trend point of view, the shareholding scale of strategic emerging companies by all institutional investors has increased year by year, among which the shareholding scale of patient capital has a high correlation with the market, but the overall trend is volatile and upward. As of the end of 2023, the above-mentioned strategic emerging companies have received a total of 1.166 billion shares held by social security funds, pensions, enterprise annuities, "national teams" and QFIIs, with a total market value of 42.141 billion yuan based on the closing price at the end of the period, and the number of shares held and the market value of the shares held have increased by 2 times and 3.57 times respectively compared with 5 years ago.
Since 2019, the market value of strategic emerging companies held by Patient Capital has been stable at more than 10 billion yuan, among which the market value of the pharmaceutical and biological, electronic and computer industries is relatively high.
From the perspective of sub-institutions, the social security fund (including pension) is the main force of patient capital, and its holdings are growing rapidly. According to the statistics of Securities Times and Databao, since 2019, the market value of strategic emerging companies held by the social security fund has been stable at more than 10 billion yuan, reaching a peak of more than 35 billion yuan in 2022, holding a market value of 31.099 billion yuan at the end of 2023, and still holding more than 26 billion yuan at the end of the first quarter of 2024.
From 2015 to 2021, the number of shares held by QFIIs in strategic emerging companies maintained an upward trend, reaching 649 million shares at the end of 2021, with a market value of nearly 30 billion yuan. At the end of 2023, the market value of the stock held will be 9.895 billion yuan, an increase of more than 2 times compared with five years ago.
In the second half of 2015, the stock market fluctuated sharply, and the "national team" increased its position significantly, which played a key role in stabilizing the market, and the market value of strategic emerging companies held at the end of the year was close to 3.8 billion yuan.
In contrast, the scale of enterprise annuities is still small, and only about 15 companies have appeared in the top ten circulating shareholders in the past five years.
Invest in high-quality companies
Significant excess returns
What are the characteristics of strategic emerging companies that are stably held by Patient Capital, and what are their fundamentals and market performance?
According to the statistics of the top ten circulating shareholders, from 2015 to 2024 (the end of the first quarter in 2024 and the end of the rest of the years), the strategic emerging companies continuously held by the social security fund, the "national team" and QFII are compared with the companies that have never been held in the same period.
Taking the social security fund as an example, the average annual net profit of the company with its long-term holdings increased by more than 38%, and the average annual weighted return on equity (ROE) exceeded 25%, but the average annual dividend yield was relatively low, only 1.03%. From the perspective of specific companies, Lanxiao Technology, which has a stable position in the social security fund, has an average net profit growth rate of more than 30% from 2014 to 2023, and an average weighted ROE of more than 16% in the same period; From 2014 to 2023, Thunderda's net profit increased by more than 25% on average, and the average weighted ROE was close to 16%.
The average annual net profit growth rate of pension holding companies is relatively high, reaching nearly 53%, but the ROE is relatively low, only 11.64%. QFII-holding companies are relatively balanced, with an average annual net profit growth of more than 30% and an average annual weighted ROE of 17.29%.
Patient capital holding companies may be "trapped" in the short term, but in the long run, the excess returns are significant.
The social security fund is a typical representative of long-term value investment in the capital market. According to the information on the official website, from 2000 to 2022, the annualized rate of return of the national social security fund reached 7.66%, and the cumulative investment income reached 1.66 trillion yuan, and from 2008 to 2022, a total of 11 years outperformed the Shanghai Composite Index. In 2008, the Shanghai Composite Index fell 65.39%, and the return on investment of the social security fund was -6.79% in the same period; In 2022, the Shanghai Composite Index fell by 15.13%, and the return on investment of the social security fund was -5.07%.
From December 2016 to 2022, the cumulative investment income of the pension is 267.082 billion yuan, with an average annual investment return of 5.44%, and the investment return rate from 2017 to 2022 is positive, while the average annual increase of the Shanghai Composite Index is only 1.3% in the same period.
Patient Capital's long-term holdings of individual stocks performed relatively well. Judging from the 8 companies held by the Social Security Fund for 6 consecutive years, the stock prices have risen by more than 40% since 2019 (as of May 10, 2024), of which Lanxiao Technology has risen by more than 350%, Yealink Network, Thunderda, and Transsion Holdings have risen by more than 100%.
What else is the patience capital
In addition to the above-mentioned institutional investors, well-known private equity fund managers such as Deng Xiaofeng, Feng Liu, and Ge Weidong have also harvested the "rose of time" in their investments.
According to data treasure statistics, Hillhouse Capital (including its HHLR), Gaoyi Assets and other tens of billions of private equity, as well as Ge Weidong (including its Chaos Investment) stocks with a long holding period, have performed relatively well.
Hillhouse Capital has been among the top ten circulating shareholders of Gree Electric since the first quarter of 2016 and will withdraw in the third quarter of 2023, during which the share price of Gree Electric has risen by more than 140%; From the third quarter of 2013 to the second quarter of 2019, the stock rose by 441.29%.
Gao Yi Asset Management has held shares in Zijin Mining since the third quarter of 2019, and the stock has risen by about 400%. Ge Weidong (including Chaos Investment) invests in technology companies, and his holdings of iFLYTEK can be traced back to 2017 or earlier, and although the stock price of iFLYTEK has risen by less than 40% since the holding of the shares, the maximum increase during the period is more than 120%.
Strategic investors are cornerstone investors in IPOs or private placements, usually with long-term investment intentions, and participating institutions include large insurance companies or their subsidiaries, large national investment funds or their subsidiaries, which are more consistent with the characteristics of patient capital.
As of the end of 2023, there are nearly 100 strategic emerging companies in the list of the top 10 circulating shareholders, an increase of nearly 30 from the previous year.
At the same time, in order to support the development of the domestic semiconductor industry, the National Integrated Circuit Industry Investment Fund (including the first and second phases, hereinafter referred to as the "big fund"), which is also a strategic investor, has an investment scale of more than 100 billion yuan.
According to data treasure statistics, since 2021, the number of strategic emerging companies with large funds in the top ten circulating shareholders has increased significantly, including Tongfu Microelectronics, BDStar, Jingjia Microelectronics, China Micro Corporation, China Resources Micro, SMIC, etc., of which the first 2 companies have been firmly held by large funds since 2019, and the last 4 companies have been firmly held by large funds since 2021. It is in a leading position in the field of semiconductors in China and even in the world.
Of course, patient capital is not only the above-mentioned types of institutions, such as insurance funds, industrial capital, and public funds, but also representatives of patient capital.
Technology is needed for fruitful results
"Patiently" waiting
For technology companies, due to the characteristics of large capital investment, long development cycle and high investment risk of new products and technologies, if there is a lack of long-term financial support, technology research and development may be stagnant, and relevant scientific and technological achievements may not be implemented, which is a huge loss for the country and society.
For example, ASML, a Dutch giant that has been focusing on lithography machines for more than ten years, was on the verge of bankruptcy due to financial difficulties, and it was not until 2015 that it finally realized the commercial mass production of EUV lithography machines.
At present, the companies with long-term stable positions of Patient Capital are still dominated by companies with stable performance, and there are still many companies with cutting-edge technologies that have not yet been paid attention to.
According to the statistics of Databao, in terms of social security funds, "national teams", QFIIs in the past 10 years (since 2015), and pensions in the past 6 years (since 2019), there are many world-leading companies in the fields of semiconductors and pharmaceutical biology, such as Microchip Biotechnology, Arcsoft Technology, China General Number, Huahong Company, etc.
Since 2016, the company has always maintained a high level of R&D investment, with a R&D intensity of more than 45%, but the company's net profit continues to be less than 100 million yuan.
ArcSoft Technology's image, audio and visual algorithms are at the leading level in the world, with R&D intensity exceeding 30% since 2016 and increasing to more than 50% since 2022.
Although the performance of these companies fluctuates greatly at this stage, with the implementation of scientific and technological achievements, the future performance has a certain explosive force, such as Haitong Securities, which said that Chipscreen Biosciences is expected to enter the year of innovative drug harvest in 2024.
![Reporter at the scene丨Huaxin Heavy Industry: Adhere to scientific and technological innovation and continue to make self-breakthroughs[fig]](data:image/gif;base64,R0lGODlhAQABAIAAAP///wAAACwAAAAAAQABAAACAkQBADs=)