Promoting Stock Market Shift from Financing to Investment: Further Support Needed for Listed Companies

By Zhan Li, Financial Commentator

Recently, China's capital market has reached a crucial juncture. According to incomplete statistics, as of October 20th, the total amount of stock repurchases by listed companies in A-share and Hong Kong markets has exceeded 3503 billion yuan, surpassing the same period's equity financing scale of 3492 billion yuan for the first time. This marks a key step towards China's stock market shifting from a financing-oriented market to an investment-oriented one, which is of great significance for enhancing China's capital market's attractiveness.

For a long time, China's stock market has been criticized by outsiders for being "heavily financed and lightly repurchased". Companies tend to raise funds quickly through equity financing, while their shareholders' returns, especially through share repurchases and dividends, are relatively meager. This imbalance not only affects investors' confidence but also constrains the healthy development of the capital market.

However, with the guidance of regulatory policies and changes in the market environment, listed companies have significantly improved their understanding and appreciation of share repurchases. The recent surge in repurchase amounts has sent a clear signal to the market that China's stock market is gradually transitioning towards a more mature and rational development stage. This growth reflects not only the improvement in listed companies' financial performance and cash flow but also the increased confidence of management teams in their shares and their determination to maintain shareholders' interests.

Firstly, share repurchases can help enhance the investment value of listed companies. By reducing the number of shares available on the market, companies can increase earnings per share, thereby boosting their valuation and attractiveness. For undervalued high-quality companies, share repurchases are an effective way to rescue themselves.

Secondly, share repurchases can strengthen investors' confidence. When stock prices are low, listed companies can use share repurchases to demonstrate their confidence in the company's future development and their commitment to shareholders' interests. This helps stabilize market sentiment, reduce panic selling, and maintain a stable market operation.

Thirdly, share repurchases are also an important means for listed companies to optimize their capital structure and improve their financial efficiency. By adjusting their capital structure flexibly, companies can enhance their overall operating efficiency. For companies in the growth or transformation stage, this is particularly crucial.

Of course, not all repurchases are beneficial. Excessive repurchases may lead to cash flow pressure and affect normal operations and investment activities. If repurchase prices are unreasonable, they may harm the company's and shareholders' long-term interests. Therefore, it is necessary to maintain a rational and cautious attitude when promoting share repurchases, ensuring that repurchases align with the company's strategic goals and shareholders' long-term interests.

Looking forward, as China's stock market continues to shift from a financing-oriented market to an investment-oriented one, share repurchases will play an increasingly important role. To facilitate this transition, further guidance and support are needed to strengthen regulatory policies, streamline the repurchase process, provide tax incentives, and encourage listed companies to conduct reasonable and justified repurchases. At the same time, it is necessary to improve information disclosure regulations, requiring listed companies to fully disclose their repurchase plans, funding sources, repurchase prices, and quantities, ensuring the transparency and fairness of repurchases.

Daily Economic News