"Combination Fist" Releases Strong Signal Shares of "Active Capital Market" | Standardization | Capital Market

Halving the original stamp duty and regulating the reduction of shares

"Combination Fist" Releases Strong Signal of "Active Capital Market"

On August 27, the Ministry of Finance and the State Administration of Taxation issued a notice on halving the collection of securities transaction stamp duty. In order to activate the capital market and boost investor confidence, starting from August 28, 2023, the securities transaction stamp duty will be halved. On the same day, the China Securities Regulatory Commission also announced a series of measures, including regulating share reduction, lowering financing margin ratios, and optimizing IPO and refinancing regulatory arrangements.

Industry insiders point out that the introduction of the above-mentioned series of policy combinations has released significant positive policy signals, clearly and effectively conveying the determination of the management to activate the capital market to the market.

Stamp duty on securities trading is the main cost component of A-share investors trading. According to research by Debon Securities, China's securities trading stamp duty was first levied in Shenzhen in 1990, during which the tax rate underwent multiple adjustments. In June 2021, the Stamp Tax Law of the People's Republic of China was passed, maintaining the stamp tax rate of one thousandth on securities transactions unchanged and only imposing unilateral taxes on sellers. According to data from the Ministry of Finance, the securities stamp transaction tax in 2022 was 275.9 billion yuan. Based on this calculation, the halving of the levy will result in a profit of over 100 billion yuan to investors. According to research by Bank of China Securities, historical data shows that the adjustment of stamp duty has a significant impact on the short-term performance of the overall market. The reduction of stamp duty has boosted investor sentiment in the market and boosted trading activity.

Chen Li, Chief Economist of Chuancai Securities, told reporters that the reduction in securities trading stamp duty rate fully reflects the central government's firm attitude towards active capital markets and confidence in protecting the stock market, releasing a significant positive policy signal. From the perspective of tax policy effects, reducing the stamp duty rate on securities trading is beneficial for reducing market transaction costs, alleviating the burden on investors, and reflecting the policy orientation of tax reduction and fee reduction, and benefiting the people.

At the same time, the China Securities Regulatory Commission (CSRC) also announced a series of measures on August 27th, which involve regulating stock reduction, lowering financing margin ratios, optimizing IPO and refinancing regulatory arrangements, and other highly concerned issues in the market.

In terms of further regulating the reduction of shares, the China Securities Regulatory Commission announced that if a listed company has broken through its stock issuance or net assets, or has not received cash dividends in the past three years, and the cumulative cash dividends are less than 30% of the annual net profit in the past three years, the controlling shareholder or actual controller shall not reduce their shares of the company through the secondary market. The concerted action of the controlling shareholder and actual controller shall be carried out in accordance with the above requirements; If a listed company discloses that it has no controlling shareholder or actual controller, the first largest shareholder and its actual controller shall comply with the above requirements. At the same time, strict control should be exercised over the total amount of reduction in holdings by shareholders of other listed companies, guiding them to arrange the reduction pace reasonably according to market conditions; Encourage controlling shareholders, actual controllers, and other shareholders to promise not to reduce their holdings or extend the share lock up period.

In terms of balancing the primary and secondary markets, the China Securities Regulatory Commission announced that it will fully consider the current market situation, improve the countercyclical adjustment mechanism of the primary and secondary markets, and focus on reasonably grasping the pace of IPO and refinancing. Mainly including: based on recent market conditions, gradually tightening the pace of IPO and promoting dynamic balance between investment and financing. For large-scale refinancing of listed companies in the financial industry or other industries with large market capitalization, implement a pre communication mechanism, pay attention to the necessity of financing and the timing of issuance. Emphasis should be placed on supporting the advantages and limiting the disadvantages. For listed companies that have experienced breakdowns, net losses, sustained losses in operating performance, and a high proportion of financial investments, appropriate restrictions should be placed on their financing intervals and scale. Guide listed companies to reasonably determine the scale of refinancing and strictly implement the requirements for financing intervals. The review will focus on whether the funds raised in the previous round have been basically used up and whether the projects raised in the previous round have achieved the expected benefits. Strictly require listed companies to invest their raised funds in their main business and strictly limit diversified investments. The refinancing of real estate listed companies is not subject to restrictions on breakdowns, net losses, or losses.

In terms of margin trading and securities lending, the China Securities Regulatory Commission announced that it will promote the full play of the functions of margin trading and securities lending, better meet the reasonable trading needs of investors. With the approval of the China Securities Regulatory Commission, the Shanghai Stock Exchange, Shenzhen Stock Exchange, and Beijing Stock Exchange have issued a notice to revise the Implementation Rules for Margin Trading, reducing the minimum margin ratio for investors to purchase securities through margin trading from 100% to 80%. This adjustment will be implemented after the market closes on September 8, 2023. This adjustment applies to both new opening contracts and existing contracts, and investors do not need to purchase balance contracts to apply the new margin ratio.

Li Xunlei, Chief Economist of Zhongtai Securities, told reporters that the halving of stamp duty and the introduction of a series of measures by the China Securities Regulatory Commission will have a positive impact on the market. He pointed out that the introduction of the above policies is an addition to the previously announced package of policies, which clearly indicates to the market that the policy toolbox still has sufficient reserves and further stabilizes market expectations.

He specifically pointed out that further regulating the reduction of shares has actively responded to market concerns. For a long time, the financing function of the A-share market has been developed, but the investment function is relatively lacking, and a large amount of reducing holdings and cashing out has been criticized by investors. In theory, when a company goes public, the market has already provided financing for it, so it should consider providing returns to investors more and actively encourage listed companies to repurchase shares. Standardizing the behavior of reducing holdings is conducive to the long-term healthy development of the market.

Li Huiyong, General Manager of the Research Department of Changjiang Pension Insurance Co., Ltd., told reporters that the implementation of the halving of stamp duty and the series of policies related to standardized reduction introduced by the China Securities Regulatory Commission have most importantly strengthened the market's confidence in the central government's call to activate the capital market and boost investor confidence. He pointed out that, including reducing transaction costs and dynamically adjusting market supply and demand, this policy has shown a very typical "combination punch" and "three-dimensional" characteristics, exceeding market expectations in terms of strength and providing real benefits to investors. At the same time, it also indicates to the market that there are more policies worth looking forward to in the future.