Chinese capital market sees value investment returning

Guo Shuqing, chairman of the China Securities Regulatory Commission (CSRC), said that the principle of value investment has started to return to the capital market in the first quarter of 2012, and that share prices in the primary market and secondary markets are becoming “coordinated.”

China’s chief securities regulator made the remarks during a recent inspection tour of southern Guangdong province, citing an overall rise in the price of blue-chips and a fall in non-blue-chips in the first quarter.

The average price earnings (PE) ratio of new stocks has fallen to 30 in the first quarter, according to a release posted on the CSRC website late Friday. In the first quarter of last year, the PE ratio for new stocks stood at more than 60.

Guo said the CSRC will continue to regulate the market with a raft of measures to improve investor education and curb speculation by cracking down on market manipulation and insider trading.

China’s securities market is still a beginner in a transitional stage, with a lot of irregularities and speculation leading to unreasonable share price structures and causing damage to investors’ benefit, said Guo.

Each year, millions of new investors enter the stock market while more exit and quit trading after suffering severe losses, which is not what the regulator wants to see, Guo added.

The CSRC is also promoting reform in the initial public offering system to curb excessively high offering prices of new stocks and ensure adequate and accurate information is exposed to investors, the chairman said.

In the latest move to better protect investors’ interests and boost better company management, the Shenzhen Stock Exchange announced late Friday that it has improved rules for the ChiNext Board, which will allow delisting of companies starting from May this year.

Companies listed on the ChiNext Board, which started trading in 2009 and mainly lists high-tech companies and those with high growth potential, will be delisted if they receive criticism from the exchange on three occasions in three years, under the new rules.

They will also be delisted if the average closing prices of their shares fall below their face value for 20 consecutive trading days, or if their net assets turn negative in the past two years due to balance sheet correction or false auditing.

Companies listed on ChiNext will be suspended from trading if they report negative net assets in their latest annual report, said the exchange, which also vowed to tighten regulation over listing, including preventing back-door listing, and boost exposure of delisting risks.

Xinhua