Capital market set for further policy boost

More policies aimed at stabilizing and advancing the Chinese capital market are expected in the near future, as the nation enhances its efforts to facilitate high-quality economic development, according to officials and experts.

Strengthening capital markets is seen not only as a domestic priority, but also a strategic response to external shocks, helping to reinforce investor confidence and create conditions for a sustained market recovery in the second half of the year.

Wu Qing, chairman of the China Securities Regulatory Commission, said at a recent meeting that efforts will focus on further optimizing equity and bond financing, as well as mergers and acquisitions.

Steps will be taken to guide capital toward sectors with long-term growth potential and strategic significance, according to the statement released on Wednesday by the CSRC, the country's top securities watchdog.

A new round of capital market reform will be comprehensively deepened, with reform of the STAR Market in Shanghai and the ChiNext board in Shenzhen, Guangdong province, playing a central role. Improving market appeal and competitiveness — alongside prioritizing market stability — will remain key tasks for regulators, Wu said.

The benchmark Shanghai Composite Index gained 0.32 percent to close at 3472.32 points on Friday, the highest level so far this year.

It can be considered that a bullish stock market driven by China's economic restructuring is taking shape, which started after the set of financial supportive policies was introduced on Sept 24, said Dong Zhongyun, chief economist at AVIC Securities.

Yang Delong, chief economist of First Seafront Fund, said the SCI may head for 3700 points later this year given the anticipated rising interest in the A-share technology companies, a recovery in domestic consumption, the inflow of foreign capital, and more importantly, the economic rebound.

The CSI 300 Index, which tracks the 300 market heavyweights in the Shanghai and Shenzhen exchanges, is likely to show an annual 6 percent profitability increase this year, Meng Lei, China equity strategist at UBS Securities, said during a press briefing on Monday.

As the A-share market is now showing a 12 to 13 percent discount compared to other emerging markets, there is more room of growth for the major indexes in China given the country's moderately relaxed credit environment and no expectation of a major external impact in the near term, Meng said.

Any incremental fiscal, monetary and property market policies are likely to further boost market confidence. The continued inflow of mid to long-term capital, such as insurance capital, will provide upward momentum for the structural reshaping of the A-share market cap, he said.

Meanwhile, the Chinese capital market will see its appeal to international investors gradually rise amid the ongoing institutional reforms, which include lowering the entry threshold for foreign-invested companies and support to boost private enterprises' vitality, he added.

Qiu Xiang, chief strategist at CITIC Securities, said the artificial intelligence and defense industries may generate more structural opportunities for A-share investors in the third quarter. As the IPOs of technology companies will restart in the third quarter — announced by the CSRC in June — more innovative products will be nurtured, directing market attention to the technology sector.

In June, a total of 152 IPO applications were accepted at China's three major bourses in Beijing, Shanghai and Shenzhen, accounting for 84 percent of the total number of IPOs registered in the first half, according to market tracker Wind Info.

While June used to be the peak season for IPO applications in China due to fiscal reporting reasons, it can be seen that companies filing for IPOs so far are mainly from strategic industries such as AI, robot, semiconductor, new energy and biomedicine, said Tang Zhehui, co-leader of EY Greater China audit services market.

"This means that the A-share market will better address the country's strategy of innovation-driven growth," Tang said.

Liu Jing, chief China economist at HSBC Global Research, said that China's macroeconomic policies will effectively support the increase in its domestic demand despite some pressure on exports. China's first-half GDP growth is likely to hit 5 percent, showing the country's economic resilience amid the rapidly changing global market.

Given the complexity in global trade and the geopolitical landscape, China's policies are likely to focus more on stability and long-term growth. Recent introduced policies, such as completely lifting the residency restrictions on joining social security programs at the place of employment, or the Private Economy Promotion Law, have targeted long-term development, Liu said.