On December 17, the State-Owned Assets Supervision and Administration Commission issued "Several Opinions on Improving and Strengthening the Market Value Management Work of Central Enterprises Holding Listed Companies." The Opinions require central enterprises to regard market value management as a long-term strategic management behavior, to improve the institutional mechanisms of market value management work, and to enhance the effectiveness of market value management work. The State-Owned Assets Supervision and Administration Commission will include market value management in the performance assessment of central enterprise leaders, strengthening positive incentives.

Everbright pointed out that as State-owned Enterprise Reform advances, market value management goals and the assessment of "one profit and five rates" are expected to enhance the capital market recognition of central state-owned enterprises and further increase their capital market value. The low interest rate environment in 2024 is expected to be sustained, and high dividend symbols are likely to continue to attract market attention.

The Opinions also propose that central enterprises should improve and strengthen the market value management work of holding listed companies from six aspects: restructuring, market-oriented reform, information disclosure, investor relations management, investor returns, and Share Buyback.mergers and acquisitions.Support holding listed companies in implementing mergers and acquisitions around enhancing competitive advantages of core businesses, improving technological innovation capabilities, and promoting industrial upgrades; guide holding listed companies to increase market-oriented reform efforts from the aspects of improving corporate governance and standardizing the implementation of Stock-based Incentive, thereby invigorating listed companies.

Since the beginning of this year, the State-owned Assets Supervision and Administration Commission and the China Securities Regulatory Commission and other departments have consecutively released market value management policies.

On January 24, the State-Owned Assets Supervision and Administration Commission stated that it would "further study including market value management in the performance assessment of central enterprise leaders"; on January 26, the China Securities Regulatory Commission proposed to "promote the inclusion of market value in the assessment and evaluation standards of central state-owned enterprises"; on January 29, the State-Owned Assets Supervision and Administration Commission proposed to "fully promote the market value management assessment of listed companies."

On April 12, the State Council proposed to "strengthen the regulation of cash dividends for listed companies" and "promote listed companies to enhance investment value"; on November 15, the CSRC formulated the "Guidance No. 10 for the Regulation of Listed Companies - Market Cap Management", requiring listed companies to improve company quality as a foundation, enhance operational efficiency and profitability, and promote investment value to reasonably reflect the quality of listed companies.

Some analysis suggests that since this year, the China Securities Regulatory Commission, the State-owned Assets Supervision and Administration Commission, and other departments have introduced several market value management requirements, including incorporating market value management into the assessments of heads of central state-owned enterprises, requiring certain companies to disclose market value management plans, and strictly cracking down on illegal "pseudo market value management" etc. The series of policies launched by the policy level places a high emphasis on market value management partly to stabilize market valuations and, on the other hand, is an inevitable requirement for the financial market to "embrace the development of new productive forces."

This round of market value management is, on one hand, implemented through strict new rules on Shareholding, Algo regulations, stringent supervision of private placements, and restrictions on the inflow of Banks' funding into the market, coupled with strict regulation of short-term speculation by various funds; on the other hand, the current policies encourage continuous loan buybacks through repurchase special loans that are favorable to state-owned enterprises with high dividend rates to enhance the valuation median, and encourage state-owned enterprises to intensify mergers and acquisitions to improve investment value through their own high-quality development.

Compared to previous merger and acquisition restructuring policies, the new merger and acquisition policies since the beginning of 2024 have the following two major characteristics:

1. Encouraging industrial mergers, especially encouraging large companies in leading positions within the industry to further consolidate their industry status through mergers and acquisitions. Encouraging industry leaders and 'two innovation' companies to efficiently acquire high-quality assets, increasing the inclusiveness of mergers and acquisitions, significantly simplifying the review process, and guiding more resource factors to gather towards new productive forces.

2. Strict regulation of reverse mergers and blind cross-industry acquisitions, firmly cracking down on 'shell speculation' activities. Since central state-owned enterprises are the dominant force in this round of market cap management, and the rigid requirement for the preservation and appreciation of state-owned assets determines that central state-owned enterprises find it difficult to acquire at excessively high valuations. Therefore, the current market's pursuit of mid-to-small market cap is driven more by short-term sentiment. In the medium term, strong dividends from central state-owned enterprises, along with leading central state-owned enterprises with a relatively high proportion of accounts receivable, as well as local state-owned enterprises with 'broken net' market caps, are likely to be the most benefited directions from this round of market cap management.

In addition, this round of 'buyback' policies significantly benefits central state-owned enterprises.

Buybacks improve share price and company market cap through increasing earnings per share, demonstrating management confidence, optimizing stock supply, and enhancing financial efficiency. However, in the past, China's Capital Markets had relatively loose regulations on buybacks, resulting in a historical occurrence of numerous companies engaging in 'pseudo market cap management'. In terms of this round of buyback policies, new regulations such as 'new rules on shareholding' impose strict regulation on behaviors like 'pseudo buybacks' that aim to short-term harvest retail investors, based on the principle that 'substance outweighs form'.

On the other hand, the current low-interest 'special refinancing for stock buyback increases' actually gives central state-owned enterprises with good cash flow dividends an 'almost risk-free arbitrage' opportunity, allowing them to continuously enhance their valuation center using this tool. Central state-owned enterprises generally have stable profitability, and their comparatively low valuations mean that their overall dividend yield is much higher than the stock buyback increase refinancing interest rate, making the buyback returns for central state-owned enterprises relatively attractive. With the inflow of funds brought about by buybacks and the release of bullish sentiment, the valuation of central state-owned enterprises will also see a certain enhancement.

GTJA stated that the central bank has pioneered two major structural monetary policy tools targeting the stock market, which are expected to promote a downward adjustment of risk evaluation in the stock market. Among them, the establishment of special refinancing for stock buyback increases has significant importance for central state-owned enterprises with market cap management requirements and privately owned blue chips with stable ROE, providing them the capability to increase their stock holdings. However, considering the asset-liability ratio requirements, the price valuation elasticity of central state-owned enterprises that have 'broken net' and companies with small circulating market cap may benefit more.

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$CHINA UNICOM (00762.HK)$The dividend yields for three consecutive years are: 2.24%, 2.43%, 3.01%. In the first three quarters of 2024, the group's revenue reached RMB 290.12 billion, a year-on-year increase of 3.0%; EBITDA reached RMB 80.4 billion, a year-on-year increase of 2.0%; profit before tax reached RMB 23.55 billion, with profit attributable to shareholders reaching RMB 19.03 billion, a year-on-year increase of 10.3%, maintaining double-digit growth.

$CRRC (01766.HK)$The dividend yield over the past three years was: 2.96%, 3.91%, and 3.80%. In Q3 2024, the company's performance steadily improved, with the Railroads Sector leading in revenue growth, particularly with a significant increase of 87.34% in revenue from trainsets, boosting the profitability level. Looking ahead to 2024 and beyond, the company will benefit from both new markets and equipment upgrades.

Editor/Rocky