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editor's note: for some time, the a-share market has been under pressure due to complex internal and external market factors, and it is difficult to give full play to its resource allocation, value discovery, wealth management and investment functions. no matter how the market evolves and develops, it always has its own laws. seeing the history clearly will help us discover the future. at present, broadening our horizons and thinking calmly will help us accurately grasp the historical position of the a-share market, see the marginal improvement in the supply and demand relationship of the stock market, and wait for the series of measures to activate the market to accumulate momentum and take effect. securities times launched a series of reports on "discovering the investment value of a-shares". through in-depth interviews and data mining, it presents the positive changes taking place in the a-share market from multiple angles, in order to build consensus, boost confidence, and jointly promote a-shares out of the downturn and onto a healthy and prosperous development track.

patient capital has received increasing attention this year.

the so-called "patient capital" refers to a form of capital that focuses on long-term investment and emphasizes steady returns. it is different from traditional short-term speculative capital, but pays more attention to the long-term development potential and value creation ability of enterprises. so, what does patient capital mean to the current capital market? what far-reaching impact will it have on a-shares? how to further cultivate and expand patient capital? in this regard, securities times and china securities journal reporters interviewed liu qingshan, chairman of beijing qinghequan capital management co., ltd. (hereinafter referred to as "qinghequan"), a large domestic private equity institution.

investment should be based on long-term

securities times·china securities journal reporter:as an investor, why should you focus on "long-termism" and patient capital?

qinghequan:first, from a macro perspective, stocks have the highest long-term investment return rate. although a-shares have a short history and relatively large short-term fluctuations, as an emerging market with great development potential, the overall annualized return rate of a-shares in the past 19 years was about 9.6%, far higher than the 4.3% of long-term government bonds, 2.5% of short-term government bonds and 2.3% of inflation.

the u.s. stock market has a long history. from 1926 to 2023, the overall annualized return of the u.s. stock market reached 10.3%, which is also higher than the 5.1% of long-term u.s. treasury bonds, 3.3% of short-term treasury bonds, and 2.9% of inflation. the main reasons behind this are: first, although the short-term macroeconomics is complex and changeable, the long-term society and economy are always moving forward; second, enterprises are the main creators of social wealth and the main promoters of production efficiency improvement. in the long run, listed companies can obtain a return rate higher than the social average return.

from a medium-term perspective, the long-term returns of investors are more in line with the shareholder returns and profit growth of enterprises. from 2005 to 2023, the annualized return of a shares was about 9.6%, which matched the average roe (return on equity) level of all a shares at about 10.5%, and the compound growth rate of eps (earnings per share) was about 6.5%. therefore, the longer the investment cycle, the more dominant the force of corporate profit growth, while the impact of valuation is obviously declining. therefore, long-term investors are not very concerned about short-term market sentiment and stock price fluctuations.

from a micro perspective, the intrinsic value of a company depends on the discount of its long-term free cash flow. in our research and investment process, the core is the analysis of the company's long-term competitiveness and the judgment of its growth potential. short-term performance games are not that important.

cultivating patient capital is of great significance

securities times·china securities journal reporter:what impact will the strengthening of patient capital have on the a-share market?

qinghequan:"patience capital" has multiple meanings, involving strategic resource allocation, economic structural transformation, capital market reform, etc. for a-share investment, we believe that multiple positive factors will be gradually released in the long run.

first, from the molecular end, the continued development of patient capital will be conducive to stabilizing the profit cycle of a-shares in the long run.strengthening patient capital and developing new quality productivity are complementary to each other. in essence, it is to build a new development model and accelerate the improvement of my country's total factor productivity. in the past, under the dominance of the financial cycle, the earnings cycle of a shares fluctuated greatly. in the future, as the innovation cycle gradually emerges, the earnings stability of a shares is expected to improve systematically, and more high-quality and competitive listed companies will emerge.

second, from the denominator side, patient capital is expected to extend the holding period of a-shares, which will be conducive to reducing the market risk premium in the long run.a-shares have a high long-term intrinsic volatility and the implicit risk premium level is high for a long time, which is not conducive to the valuation and stability of a-shares. in the future, as patient capital continues to increase, there will be positive changes. on the one hand, assets that meet the long-term capital preferences and stock selection criteria are expected to enjoy dividends first; on the other hand, the overall risk premium of the market is also expected to gradually decline, thus providing some support for the overall valuation of the market.

overseas experience can be used as a reference

securities times·china securities journal reporter:in the current environment, how can we increase the proportion of patient capital?

qinghequan:first, increase investment in pension benefits.the current proportion of institutions in a-shares is less than 20%, and the development of long-term funds is still immature. there is still a large gap with overseas developed markets. taking the us stock market as an example, the current proportion of institutions is close to 60%. referring to the experience of the us stock market, the period when its institutional share increased fastest was around the 1980s, from 20% in 1970 to 63% in 2000. the main driving force during this period was the active entry of us pension funds into the market. from a policy perspective, the introduction of ira and 401k accounts in the united states has greatly promoted the development of us pensions through tax deferral benefits. from an operational perspective, us pensions are highly market-oriented, and managers aim at long-term investment, with low fees and a simple model. specifically in china, it is recommended that my country should also develop the second and third pillars of pensions as soon as possible, and at the same time improve the assessment and standardization of pension equity investments.

the second is to enhance the inherent stability of the capital market.the a-share market has experienced large short-term fluctuations, significantly affected by macro factors and market sentiment. at the same time, the current infrastructure of the a-share market still needs to be improved. due to its relatively poor self-regulatory ability, it is necessary to take measures to deal with market failures. on the one hand, it can effectively stabilize the market, and on the other hand, it can inject confidence into the market.

in summary, we believe that investment should be based on the long term. in the future, we should pay more attention to the company's long-term shareholder returns, long-term profit growth, and long-term creation of free cash flow. we believe that with the continuous growth of patient capital, the vitality of a-shares is expected to be released again.

editor: gui yanmin

proofreading: yao yuan