Li Zhan, chief economist of the Research Department of China Merchants Fund: Resource prices will remain high, and the valuation of related companies in the selected layer of the New Third Board will increase

Per reporter: Wang Yandan Per editor: Wu Yongyong

Recently, the second batch of business rules of the Beijing Stock Exchange (hereinafter referred to as the "Beijing Stock Exchange") solicited opinions from the market, namely, public offering and listing, refinancing of listed companies and review rules for major asset restructuring.

On the afternoon of September 13, around the institutional innovation and market opportunities of the Beijing Stock Exchange, Li Zhan, chief economist of the Research Department of China Merchants Fund, and Ren Fei, senior reporter of the Daily Economic News, visited the live broadcast room of "Hao Ge's Afternoon Tea" through the APP and exchanged their wonderful views on the investment opportunities of the "Beijing Stock Exchange" with investors. In addition, he also commented on hot resource stocks such as coal and steel.

(Li Zhan, chief economist of the research department of China Merchants Fund, courtesy of the interviewee)

<h2>The logic of this round of commodity price increases is different from the previous one</h2>

Li Zhan first pointed out that the logic of the recent rise in the cyclical industry is different from before. In the past, international commodity prices rose, which is closely related to China's economic cycle. Especially in the upward cycle of China's economy, infrastructure and real estate have driven demand for commodities such as steel and building materials, which has led to an increase in international commodity prices.

However, in the process of rising commodity prices, domestic demand has not increased so rapidly, especially real estate demand has weakened. Internationally, due to the large release of water in Europe and the United States during the epidemic era, monetary easing has caused commodity prices to rise. Coupled with the economic recovery in Europe and the United States after the epidemic, the actual demand for commodities has been driven. The superposition of the two phases has led to an increase in international commodity prices.

At the same time, Li Zhan pointed out that under the requirements of "double carbon", there is a gap between supply and demand in the supply compression of coal and other industries, coupled with the limited production of new production, the short-term supply gap is not easy to make up. It is expected that international commodity prices will remain high until the first half of next year, while international prices will be transmitted to the country, which will also lead to domestic prices remaining high for a longer period of time.

<h2>In the past, the liquidity restrictions of the New Third Board affected the financing needs of enterprises</h2>

In terms of institutional innovation of the "Beijing Stock Exchange", Li Zhan first reviewed the history of the New Third Board, pointing out that in the past, the liquidity restrictions on the New Third Board had an important relationship with the implementation of the mixed trading system. From the perspective of historical comparison, it shows in which aspects the "Beijing Stock Exchange" has made innovations.

He pointed out that tracing the history, the establishment of the New Third Board was initially translated from the Zhongguancun equity system, which is a pure over-the-counter market. After the establishment of the national stock transfer center in 2013, we defined it as an on-exchange market, mainly serving small and medium-sized enterprises, but its trading system is obviously different from the Shanghai and Shenzhen exchanges, and the implementation of a mixed trading system - that is, a trading system in which protocol trading, market making transactions, and auction transactions coexist.

Since the New Third Board is positioned as an important platform for the capital market to serve small and medium-sized enterprises, the group is relatively extensive, so under the joint promotion of local governments and financial institutions, after 2014, the New Third Board ushered in a climax of listing, and the highest peak reached 12,000 companies to list.

Compared with the centralized bidding system of the Shanghai and Shenzhen exchanges, the hybrid trading system of the New Third Board is still subject to many restrictions, although it is constantly improving. Liquidity restrictions in the secondary market affect the financing of its primary market, including refinancing and M&A financing in the secondary market, major asset restructuring, etc., affecting financing services for small and medium-sized enterprises, coupled with the excessive investor threshold to further restrict liquidity, after a sharp adjustment in 2015, the number of listed companies gradually decreased to more than 7,000.

<h2>The "Beijing Stock Exchange" system is "precision drip irrigation" for related companies</h2>

Li Zhan pointed out that the institutional innovation currently announced by the "Beijing Stock Exchange" is very distinct, which is precise drip irrigation for related companies. With the major innovation of the system, including the selected layer of the new third board, the valuation of related companies will rise. At the same time, he also commented on the specific points of institutional innovation.

First, the "Beijing Stock Exchange" has generally shifted the conditions for the issuance and listing of selected layers. At present, there are more than 1,200 innovation layers, and after preliminary estimates, about half of them , that is, about 600 companies , can meet the listing conditions of the selected layer. If these more than 600 companies can be listed on the "Beijing Stock Exchange", the capacity of the market will be liberalized at once, and the market liquidity and financing functions will be greatly improved.

Second, in terms of the trading system, the "Beijing Stock Exchange" implements continuous auction trading, and there is no rise or fall on the first day of listing, and then the limit on the rise and fall is 30%, which significantly increases the flexibility of the market. In terms of exit arrangements, a diversified delisting indicator system with in and out has also been constructed.

In terms of activity, everyone is now concerned about the investor threshold. It is estimated that the regulatory authorities are now also doing corresponding research to see how to match more flexible and suitable investor thresholds at different levels.

<h2>The implementation of market-oriented pricing on the listing of new shares on the "Beijing Stock Exchange" is conducive to the rational valuation</h2>

Ren Fei, a senior reporter of the Daily Economic News, mainly analyzed his views on the growth of listed companies on the Beijing Stock Exchange.

As we all know, many enterprises in the ChiNext board or the science and technology innovation board have been "raised" by VCs and PE before the IPO, and the growth rate after listing has declined, resulting in these companies being given high valuations before listing, and the valuation after listing has declined. This means that investors do not fully share in the fruits of their development. Can the "Beijing Stock Exchange" solve this problem?

Ren Fei said that this problem is simply the so-called valuation inversion, but to draw a period of time to see, before the launch of the pilot registration system, A-share listing has a top limit of 23 times the price-earnings ratio, then the valuation imagination space of enterprises must be very different, but the market's new investment has to some extent been different companies of different colors are treated the same, relying on the board to do more income, forming the illusion of the secondary market to the primary market to lift the car, but also greatly overdraft its valuation for many years to come, itself is a kind of speculation, Valuation regression or adjustment is inevitable.

But now, the new stock pricing of the science and technology innovation board and the ChiNext board has been changed to market-oriented pricing, and the listing of enterprises may have the possibility of breaking from the beginning, which is a kind of resistance to the aggressive profit-seeking of the investment community, after a period of time, the market will return to rationality, whether it is the primary market or the secondary market, the bubble-blowing investment will cool down.

The source of the listed company of the "Beijing Stock Exchange" can be the selection layer, can also be the promotion of the innovation layer, in the context of full market trading, the valuation of this measurement standard is bound to become rational, and just like the stocks of the Shanghai and Shenzhen Exchanges now, the valuation is too high in the stage will be pulled back, the main public offering will also tap the emerging track, rather than blindly hugging, then, like the valuation of the selected layer company to a certain height, will also prompt the funds to continue to dig upstream investment opportunities, at that time, the opportunity of the innovation layer will come.

<h2>The establishment of the "Beijing Stock Exchange" will play a positive role in common prosperity</h2>

In addition, one of the hottest topics in the market right now is common prosperity. Li Zhan also expressed his views on the relationship between the establishment of the "Beijing Stock Exchange" and the realization of common prosperity, believing that the "Beijing Stock Exchange" will play a positive role in promoting common prosperity from the perspective of the capital market.

Li Zhan believes that the vast number of small and medium-sized enterprises, especially the dynamic small and medium-sized enterprises, have absorbed a large number of jobs. Therefore, the development of small and medium-sized enterprises has a major supporting role in employment. This is one of the conditions for achieving common prosperity.

In terms of investment opportunities, the "Beijing Stock Exchange" provides investors with a platform for investment in small and medium-sized enterprises, so that investors can enjoy the high growth dividends brought by "specialized and specialized" enterprises, which will help increase property income.

However, Li Zhan also stressed that the listed companies on the "Beijing Stock Exchange" have the characteristics of high growth, and of course, they have also determined a relatively high risk. Therefore, when investors invest in "specialized and new" enterprises, it is best to consult the investment advice of professional institutions, and they can also choose public funds for asset allocation, which can save energy and time. In addition, the allocation of the new third board by public funds has a proportional limit and also avoids certain risks.

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