Securities Daily: Further Discussion on the Backbone of A-shares: Listed Companies | Individuals | Economy | Investment | Value | Market | Institutions | Investors

On January 26th last year, the author wrote an article titled "Strengthening the Backbone of A-shares" in response to the sharp decline in the stock market, calling on institutional investors to adhere to the value investment philosophy and play the role of market ballast and setting star. It has been almost 19 months since then, and the market has once again experienced a significant adjustment. It is necessary to talk about strengthening the backbone of the A-share market.

According to statistics from Shenwan Hongyuan Securities, as of the end of 2022, the market value of various professional investment institutions in the A-share market accounted for about 22%, and the trading volume accounted for about 30%; Individual investors hold approximately 40% of the market value and 70% of the trading volume. Although there may be some differences in relevant data according to different statistical methods, the proportion of institutional investors in both categories has significantly increased in the past five years, and the market influence has been greatly enhanced. Institutional investors, especially large ones, have advantages in talent, research and development, information, funding, and brand. Every move they make has a significant impact on the market trend, and they should serve as role models for value investment and maintain the stability of the market value center. The scale of individual investors in our country is relatively large, but their investment decisions are diverse and their trading directions are scattered, making it difficult to form a leading value consensus. More often than not, it is reflected in a herd following model, which places great emphasis on institutional trends and the operational experience of others, but lacks independent research and value persistence. Therefore, when policies or unexpected events arise, the herd effect of individual investors is very obvious, and stampede effects also occur from time to time. So, the role of a stabilizer and ballast for large institutional investors is even more important.

Institutional investors, especially large ones, need to maintain the stability of the market value center, not only with real gold and silver, but also with responsibility for the economic situation, market prospects, and value judgment, and play a leading role. This is because institutional investors are not only traders of equity products, but also interpreters and disseminators of information. They are platforms and channels that provide trading services for individual investors. If their investment concepts, value judgments, and information interpretations deviate or even become chaotic, and are supported by practical operations, their impact on market sentiment and atmosphere is strong. In fact, there are indeed some investment institutions that only value their own business performance and do not pay attention to the impact of their own behavior on the entire market. They even follow the trend of rising and falling like ordinary individual investors, helping to rise and fall when the market fluctuates greatly, exacerbating market panic. Some institutions are also short selling or short selling, specializing in the counterparty market of individual investors, commonly known as "cutting leeks". In today's era of strict supervision, there are fewer institutions that dare to violate laws and regulations by "cutting leeks", but there are also many that follow the trend and "cut leeks" by the way. The regulatory authorities require mainstream institutional investors to "refuse short-term speculation", "carry out countercyclical layout", and "conduct long-term assessments", and continuously improve regulatory measures, which will promote institutional investors to effectively fulfill their responsibilities and obligations as value investment leaders.

At present, the economic operation is in a critical period of climbing, and it is particularly necessary to gather market consensus and effectively prevent the accumulation of misunderstandings and loss of confidence. In the first half of this year, the gross domestic product (GDP) increased by 5.5% year-on-year, the total retail sales of consumer goods increased by 8.2% year-on-year, and the added value of the tertiary industry increased by 6.4% year-on-year, highlighting that consumer and investment demand is steadily recovering and growing. Of course, restoring growth is not a linear process, but a process of wave like development and tortuous progress. This is an inevitable form of economic impact and structural adjustment, which does not mean that the economy is no longer working. Since the beginning of this year, in response to the problems and difficulties in the process of economic recovery, the Central Committee of the Communist Party of China and the State Council have continuously launched a series of policy measures such as expanding domestic demand, stabilizing the market, promoting innovation, and expanding opening up, which have been widely welcomed by the industry, consumers, and investors, and the policy effects are gradually becoming apparent. Market participants, including institutional investors, should identify and refrain from spreading false information and providing channels for "small essays" about the various voices that are singing short about the Chinese economy and stock market.

At present, the vast majority of over 5000 listed companies in China operate steadily. As of August 21, a total of 1031 companies have disclosed their 2023 semi annual reports, and 554 listed companies have achieved a year-on-year increase in net profit, accounting for 53.73%; 40 listed companies plan to distribute dividends in mid-2023. Of course, there may also be some companies that perform poorly or even suffer losses. Institutional investors should identify the root causes and help relevant companies find solutions to the problems. Even though the economic recovery is still in the climbing stage, we still see that a considerable number of listed companies are undervalued. Mainstream institutional investors should conduct in-depth research on the actual situation, adhere to the value investment orientation, lead other investors to dispel the information fog, and open up a new stage of value investment prospects.

We also hope that top listed companies in various industries and high-quality listed companies in segmented fields can play a value leading role. Firstly, we will conscientiously carry out daily operations, play a positive role in promoting the expansion of domestic demand, industrial structure adjustment, and innovative development, and truly repay investors; The second is to attach importance to market value management, take necessary measures to stabilize the market value center, and release stronger investment confidence to the market.