Three Bases Solidified for "Slow Oxen" to Move Forward
Commentary by Du Hengfeng
On August 13, the Shanghai Composite Index reached a high of 3688.63 points, breaking through the previous high point of September 24, 2024, and was only one step away from the highest level in the past decade. The upward trend of the index gave rise to a significant wealth effect, with the total value of A-shares increasing by 323 billion yuan from September 18, 2024, to August 12, 2025; even excluding large shareholders and major shareholders holding over 5%, the free-float market capitalization of A-shares still grew by 148 billion yuan. These wealth effects were realized in the financial income of investors.
Although the index has approached similar points, its internal logic is completely different from that of the "9.24" episode. After the peak on October 8, 2024, A-shares entered a market-anticipated "slow oxen" phase. Why can A-shares continue to move forward? I believe it can be observed from three aspects.
One is that macroeconomic policies have been implemented in a concentrated manner, providing a solid foundation for the capital market to run stably.
The "9.24" episode began in an extremely low state of the market, with the index at its lowest point in years. When the Central Political Bureau meeting was held to deploy the next step of economic work, important statements were made on macroeconomic policies and capital markets, which suddenly reversed the market's low sentiment and ignited investors' confidence. However, at that time, the market was mainly driven by optimistic expectations from a technical perspective. More importantly, policy implementation needs a gradual process, requiring incremental changes to be translated into actual actions and have a practical impact on the economy before stock prices can move in a healthier way. Since last October, macroeconomic policies have continued to implement and take effect, such as the PBOC's continuous reductions of reserve requirements and interest rates, increased subsidies for new businesses, and so on. These policy effects have been verified: China's foreign trade data has withstood the test of the US tariffs war, with a year-on-year growth of 3.5% in the first seven months; and GDP grew by 5.3% in the first half of the year, with high certainty that it will meet its full-year target.
Two is that capital market reforms have taken effect, solidifying the institutional foundation for stable operation.
Over the past year and a half, the capital market has entered a concentrated reform period, with changes from the financing side to the investment side and in the regulatory area. The face of the market has already changed dramatically. On the investment side, public fund reforms have reduced the holding costs for investors, achieved "incentivizing compatibility" through floating fees, self-purchased funds, and other mechanisms, increasing investor returns; passive investments have rapidly developed, with new products such as dividend-themed, free cash flow-themed, and so on entering the market, reducing market volatility rates; state-owned commercial insurance companies and public funds have implemented long-term assessment and pension insurance, bringing a steady stream of long-term capital into the market; and the Central Huijin Company has become a " quasi-stable fund" location, serving as a stabilizing force for the market. On the financing side, measures such as the "six articles on mergers and acquisitions" and the setting of science and technology innovation board have improved the inclusiveness of the capital market, provided a clear path for hard-core technology companies to go public, and activated market vitality. Meanwhile, strong supervision has effectively cracked down on illegal activities such as financial fraud, stock price manipulation, and insider trading, putting pressure on intermediaries and punishing third-party entities that collude with fraudulent activities, in addition to combining law enforcement and regulatory models, forming a powerful deterrent against violating the rules.
Three is that returns are emphasized, anti-inflation measures are taken, and new production forces break through, laying a good microeconomic foundation for stable operation of the capital market.
Listed companies are the core entities of the capital market, and their quality determines the quality of the capital market. The key indicator for evaluating listed companies is whether they can create real returns for investors. The implementation of mandatory dividend policy has become an important measure to force enterprises to improve their operating quality. In 2024, the total cash dividends paid by A-share companies reached 243 billion yuan, a new high in history. Anti-inflation measures have also helped listed companies improve their operating quality, such as the 60-day payment requirement for the automotive industry, which not only reduced the financial burden on upstream suppliers but also allowed the entire vehicle industry to participate more fairly; and anti-inflation actions in industries such as solar power, lithium batteries, steel, etc. have boosted product prices and improved enterprise operating conditions. In addition, price law revisions and standardized local government procurement will effectively regulate "inflationary" competition from a regulatory perspective.
The capital market is a complex system that requires all systems to be in place for long-term continuous growth. From the above three aspects, it can be seen that the favorable conditions are already in place, and the trend of market stability has the potential to continue.