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text: ren zeping team

summary

the capital market is of great significance in increasing the wealth effect of residents, promoting consumption, and promoting technological innovation.

go all out to fight for the economy, in factthere is a good way at present, which is to prosper a-shares. boosting big a can boost market confidence, increase the wealth effect of residents, and then promote technological innovation, which is beneficial to both the current and the long-term.you can consider asking institutional investors to increase the proportion of bargain-hunting allocations, play the role of ballast for value investors, and at the same time cooperate with tax reductions and fees to activate the market.

recently, the focus on fighting for the economy has triggered heated discussions in the market. after experiencing the "indian summer", the property market quickly turned into a downturn. the stock market continued to fall in the early stage, and residents' wealth shrank, dragging down residents' consumption tendencies.

under the current situation, a prosperous stock market may be a pareto optimal solution and good governance that benefits the country and the people, which is beneficial to both the present and the long-term.

currently, there are four major benefits to boosting confidence in the stock market: 1. the current valuation of a-shares is at a low level, and many sectors will not rip people off. boosting the stock market is just the right time, and it is also the proper meaning of counter-cyclical adjustment; 2. prosperity the stock market can stimulate the wealth effect and have an immediate effect on stimulating consumption; 3. the current trend of residents' precautionary savings is obvious, and liquidity is accumulated among banks. boosting the stock market will help open up the capital circulation; 4. a prosperous stock market can support specialization special new scientific and technological innovation enterprises promote scientific and technological innovation and high-quality development of china's economy.

it can be seen that the current prosperous stock market and boosting market confidence are of great significance to the stock market, residents' income, consumer confidence, economic growth, technological innovation, high-quality development, etc. one stone can achieve multiple benefits. if the intensity is well grasped, it will be profitable. no harm done.

in order to boost confidence in the stock market and assist economic recovery, it is recommended that: 1. increase the allocation of institutional investors, consider establishing stabilization funds, absorb bargain hunting, and play the role of "ballast" for value investors; 2. reduce or cancel transaction taxes and fees will increase market vitality; 3. encourage listed companies to pay dividends and share development dividends; 4. promote supporting reforms in the capital market through a multi-pronged approach, including improving the information disclosure system, promoting normalization of delisting, and strengthening investor protection.

we believe that through a series of substantive and powerful measures, we will be able to boost confidence in the stock market, prosper the stock market ecosystem, and contribute an important force to china's economic recovery, technological innovation, and high-quality development.

(this article was first published in june 2023)

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1. the property market is sluggish, the stock market has fallen, and residents’ wealth has shrunk. prospering the stock market is a good way.

recently, the policy focus on fighting the economy has triggered heated discussions in the market.after experiencing the "indian summer", the property market quickly turned into a downturn. the stock market has continued to fall recently, and residents' wealth has shrunk, dragging down residents' consumption tendencies.

from the beginning of 2022 to the end of may 2023, the csi 300 fell by 18%, and the gem and science and technology 50 fell by 27.8% and 22.7% respectively. in terms of public funds, the net value of partial equity funds fell by an average of 4.7% in may, and positive return funds accounted for less than 15%.

under the current situation, a prosperous stock market may be a pareto optimal solution. a prosperous stock market is good governance that benefits the country and the people, which is beneficial to both the present and the long-term.

the report of the 20th national congress of the communist party of china clearly pointed out that "improve the functions of the capital market and increase the proportion of direct financing"。

on the issuer side, the capital market can accurately capture the financing needs of various enterprises at different stages of development, help the domestic industrial chain become bigger and stronger, and promote financial service entities. on the investor side, the capital market can match the risk preferences of different types of funds and realize the rolling appreciation of social wealth.

the current economic recovery is in a "climbing and overcoming" period. boosting market confidence and prospering the stock market are good ways to achieve multiple goals with one stone.

2. boostconfidence in the stock market is a good approach and good governance that benefits the country and the people, both currently and in the long run.

in the current economic environment, introducing policies to rescue the stock market and boost investor confidence is good governance that benefits the country and the people, both currently and in the long run. boosting confidence in the stock market will not only help convert residents' deposits, strengthen the wealth effect, and stimulate consumption, but also promote technology companies to benefit from the development of the capital market, which is in line with major national policies.

1. the current valuation is at a low level, and it is just the right time to boost the stock market, which is also the proper meaning of countercyclical adjustment.。

looking at the price-to-earnings ratio indicator, the average price-to-earnings ratio of all a-shares in may was only 11.59, while the averages for 2022 and 2021 were 12.91 and 16.06 respectively, which are currently at historical lows. encouraging people to enter the market now will not rip people off, which is also the proper meaning of counter-cyclical adjustment.

2、boosting the stock market can stimulate the wealth effect, strengthen residents' "mental accounts", and have an immediate effect on stimulating consumption.

domestic and foreign scholars have demonstrated through theoretical and empirical research thatwealth effectthe mechanism of action: after the price of stocks held by households increases, the budget level increases, which in turn drives the marginal propensity to consume. in china, the wealth effect of the stock market is highly correlated with household consumption, especially affecting current consumption.

at the current stage, to boost stock market confidence: (1)directly increase household current income, to increase the consumption budget; (2) according to the "mental accounting" theory, for stock market profits, the residential sector is more eager to convert them into consumption behavior; (3) strengthen expectations for economic recovery,improve expectations for future income, improved income expectations will also stimulate consumption behavior. therefore, boosting stock market confidence will have an immediate effect on expanding domestic demand and stimulating consumption.

3、the current trend of residents' precautionary savings is obvious, liquidity is piling up among banks, and institutions and individuals are equipped with "ammunition." boosting the stock market will help open up the capital circulation.

in april, the year-on-year growth rate of resident time deposits was as high as 21.7%, exceeding the growth rate of demand deposits by 12.8 percentage points. at the same time, the market's pledged repurchase scale has increased significantly recently, from an average of 5.4 trillion in september last year to an average of 7.4 trillion in may this year, which means that high-quality investment products are relatively scarce in the market, forming an "asset shortage."

at present, how to promote the conversion of household sector deposits and relieve the liquidity accumulated among banks has become the key to the economic recovery passing through the ramp-up period.after boosting confidence in the stock market, it can stimulate the investment desire of institutional and individual investors, thereby promoting the conversion of deposits, easing the idling of funds, and transmitting monetary benefits to real enterprises, which is undoubtedly a good way to fight the economy.

4、boosting the stock market can support specialized and new technological innovation enterprises and promote technological innovation and high-quality development of china's economy.

the capital market plays an important role in promoting technological innovation and high-level circulation of the real economy, and has become the financial starting point for promoting technological innovation. for example, since its establishment more than three years ago, the science and technology innovation board has strengthened its "hard technology" features and served scientific and technological innovation enterprises with breakthrough key technologies. the multi-level capital market system composed of the main board, the science and technology innovation board, the gem, and the beijing stock exchange implements services for science and technology innovation from multiple dimensions and from a full perspective, and is of great significance in solving the financing problems of high-quality small and medium-sized private enterprises.

in the context of a comprehensive registration system, the introduction of a "package" of policies to boost the stock market can promote the development of emerging technology industries represented by new energy, information technology and other fields, as well as financial service entities.

on the issuer side, emerging technology industries that represent technological upgrading and are in line with national industrial transformation policies will directly benefit, such as new energy, pharmaceutical biology, information technology and other fields.

on the investor side, the booming stock market can encourage technology companies in the rapid growth period to enter the market early, and investors can then enjoy the rapid growth dividends of these companies instead of the lower growth after maturity.

3. how to prosper the stock market? increase the allocation of institutional investors, reduce transaction taxes and fees, encourage dividends, and improve the supporting construction of the capital market

1. increase the allocation of institutional investors and give full play to the "ballast" role of value investors

increasing the allocation of bargain hunting by institutional investors can reduce market volatility, guide the concepts of value investment and medium- and long-term investment, and promote the high-quality development of the capital market.. according to the first quarter report of 2023, the calculated proportion of institutional investors in the circulating market capitalization is 12.96%, of which fund companies, insurance, and social security funds account for 37.9%, 15.2%, and 4.6% of institutional investors respectively. in terms of public fund holdings, as of the end of 2022, the net holdings of institutional investors accounted for 47.5%. compared with the capital markets of overseas developed economies, the proportion of institutional investors is still low.

on the one hand, improve the long-term assessment mechanism for institutional investors, taking medium- and long-term income levels as the key assessment indicator for managers, rather than encouraging short-term gains to "decorate" performance. improve the professional capabilities of asset management institutions, develop asset management products and securitization products to promote the transformation of short-term funds into long-term funds, and optimize the investor structure.

on the other hand, long-term funds such as pension funds and central huijin are encouraged to actively enter the market. we can consider establishing stabilization funds to absorb bargains and play the role of "ballast" for value investors.. it is recommended to break through the market entry bottlenecks for various institutional investors such as social security funds, bank financial management, insurance, and corporate annuities. at the same time, we will steadily promote opening up to foreign investment and guide the vigorous development of the private equity and venture capital fund industries.

2. reduce or cancel transaction taxes and fees to increase market vitality

reducing or canceling stamp taxes on stock transactions and saving market transaction costs can effectively boost confidence in the stock market.in the era of paper vouchers, it is reasonable for the government to impose stamp duties due to the frequent use of paper stocks "decal-endorsed" by the government. however, with the advent of the era of electronic and paperless transactions, the basis for taxation has undergone significant changes, and the rationality of continuing to levy stamp duty on stock transactions has declined. historically, the adjustment of stamp duty rates has been given the function of regulating the market, but it cannot change the overall trend of the stock market, but intensifies short-term fluctuations. developed markets such as the united states, germany, and japan have successively eliminated stamp taxes on securities transactions.

it is recommended to reduce or cancel the stamp duty on securities transactions in a timely manner according to market conditions.. there are two advantages: on the one hand, according to the fiscal data from january to april, the stamp tax on securities transactions was only 71.6 billion yuan, a sharp decrease of 42.7% year-on-year, accounting for only 0.1% of the general public budget revenue. adjusting this tax will put financial pressure on not big. on the other hand, adjusting the stamp duty on securities transactions will reduce market transaction costs, enhance investor confidence and capital market vitality, and promote healthy market development.

3. encourage listed companies to pay dividends and share development dividends

optimizing the dividend mechanism for listed companies and encouraging qualified listed companies to continue paying dividends is an important measure to boost the stock market.. stable dividends are a key signal for listed companies to convey good operating conditions. they can be used to effectively measure medium- and long-term investment values, cultivate market value investment concepts, and are also important property income for investors. at present, vigorously encouraging and guiding listed companies to pay dividends can effectively boost market confidence, enable investors to enjoy the dividends of economic development, and thus attract more long-term funds into the stock market.

4. promote supporting reforms in the capital market and purify the market environment through a multi-pronged approach

improve information disclosure, improve the quality of listed companies, and strengthen investor confidence. information disclosure is the core of the registration system. regulatory authorities should strengthen the guidance and standardization of information disclosure by issuers, forcing intermediaries to tighten their responsibilities and enterprises to regulate their operations. at the same time, the china securities regulatory commission, the listing committee, and the reorganization committee should also conduct spot checks on issuance review work to ensure that issuers, investment banks, and exchanges fulfill their respective responsibilities.

promote supporting legal systems such as company law, securities law, and criminal law, improve the collective litigation system, increase penalties, rectify chaos in the capital market, and continuously promote the normalization of delisting.as an important supporting component of the registration system, the delisting system is a strong guarantee for the survival of the fittest in the capital market. it can allow funds to flow to high-quality companies, while forcing listed companies to remain vigilant and standardize capital operations at all times. in 2022, 50 a-share companies will be delisted, of which 42 will be forced to delist. the normalization of delisting has initially appeared, but the delisting ratio still lags far behind that of developed markets.

references:

Gan, J. (2010). Housing wealth and consumption growth: Evidence from a large panel of households. The Review of Financial S tudies, 23(6), 2229-2267.

pan shengjie, song yinqiu, zhang hongyan. research on the effects of monetary policy regulation and stock market wealth effects - dsge model based on china's mixed monetary policy [j]. management review, 2022, 34(05): 25-36.