SSE Application For Building The Trading Platform In the Shanghai Free Trade Zone Approved
Gui Minjie, Member of the CPPCC National Committee and SSE Governor, recently says at the press release for deputies to the NPC and members of the CPPCC National Committee in the securities regulatory system that, conditions have become ripe for launching the trading system of T+0 for large-cap stocks, which will be promoted by the SSE in the future. It is suggested that the SSE should establish the board of strategic emerging industries, which is oriented for comparatively large strategic emerging enterprises with steady growth. This board is expected to complement the growth enterprise board market. In addition, the SSE will try to launch individual stock options in 2014.
With an aim to develop new attractions on the SSE market, and meet the needs of the real economy in China, Gui says that, the SSE is studying, demonstrating, and considering about adding the new board specially oriented for economic transformation and upgrading, that is, the board of strategic emerging industries, in a bid to complement the present blue-chip market, and adjust the stock structure of the SSE market.
According to Gui, the board of strategic emerging industries is positioned to serve comparatively large enterprises with steady growth, which means, this board will complement the growth enterprise board market and the main board.
However, Gui adds that, although the SSE market is mainly featured with large-cap stocks and traditional stocks, it does not mean that these enterprises or industries are outdated. Actually, with the improvement of strategic emerging industries, these enterprises are equally entitled to economic achievements. Besides, as the reform of state-owned enterprises for 2014 has begun, next, the SSE will encourage enterprises to promote rationalized reinforcement in terms of issues such as merger, acquisition, reorganization, assets injection, and overall listing.
Regarding investors’ confidence and protection of their rights and interests, Gui reveals that this year, the SSE will launch guidance for disclosure of industry information, strengthen protection of small and medium-sized investors’ rights and interests, implement guidelines for separate vote counting for small and medium-sized investors, and overall online voting, and those for promoting the system of cumulative voting, and vote collection, as well as study the dispute-settling mechanism for investors in this group. In addition, the SSE will better its arrangements for systems such as cash dividend distribution and share repurchase, study on establishing the system of scrip dividend and the system of diversified investments, implement the regulatory guideline for cash dividend distribution, urge listed companies to pay cash dividend, enhance return for investors, and promote the balance between investment and financing of the capital market.
As for the development of derivatives, the market is looking forward to the launch of individual stock options. According to Gui, in 2014, the SSE will go all out to do all relevant preparatory work for the launch of individual stock options. “We have submitted the report on applying for launching individual stock options to the China Securities Regulatory Commission (CSRC) for approval. Further, the CSRC will also need to do some work items, including the work of releasing measures for management on option trading.”
It is introduced that, the SSE will continue to promote innovation on the market in 2014. It has now planned to launch commodity ETFs, split-capital funds, and other products, as well as launch LOF products in 2014.
During the NPC and CPPCC sessions for 2014, one of the most frequently asked questions for CSRC Chair Xiao Gang, and Gui is the T+0 trading system.
As the most widely adopted trading system in major exchanges all over the world, on the one hand, the T+0 trading system could enhance efficiency in pricing and trading, lower costs of trading, capital, and opportunity, on the other hand, there are some doubts about possible over-speculation and unfairness on the market.
According to Gui, possible over-speculation and over-trading could be curbed by proper measures, such as regulation on accounts, investor suitability management, linking between trading by accounts and margins, and restriction on trading frequency, as well as other systematical arrangements.
“On the whole, we believe that, it is ripe for launching the T+0 trading system on the large-cap stock market, which will be facilitated in the near future,” says Gui.
When internationalization is concerned, Gui also puts forward his opinions. As the CSRC has recently approved the SSE’s application for building the trading platform in SFTZ, the SSE will vigorously participate in the construction of the SFTZ in 2014, in a bid to build a trading platform of international financial assets in the SFTZ for international investors.
With regard to the reform of the share issuance registration system highly concerned by the market, Gui holds that the whole securities system will fuel the reform of the registration system this year. Before the law amendment, preparatory work will be carried out. The SSE has been participating in the reform of the registration system, and it has organized a team to do work items involving research schemes, systems, and rules.
Gui also believes that under the current system of the “Securities Law”, some obstacles exist for decentralizing the authority of refinancing approval to exchanges. However, the work of simplifying examination and approval procedures for refinancing is continuously propelled before the law amendment.
Gui introduces that this year, three proposals will be submitted to the NPC and CPPCC sessions for 2014 as follows.
First, the tax system for individual securities investment should be optimized, and direct financing proportion should be elevated as well. It is suggested that we should work out a policy of interest income tax for corporate bonds held by individual investors as the same as that for treasury bonds, local government bonds, financial bonds, and bank deposits, exempt individual investors from income tax for dividends resulted from shares in listed companies (excluding shares with sales limit) held by them, instead of repeated taxation, and further lower the stamp duty rate for stock trading.
Second, the system of the capital market should be perfected, and strategic emerging industries should be boosted as well. It is suggested that the board of strategic emerging industries should be established on the SSE to serve emerging moderate-scale innovative enterprises that have gone through business startup period. When it comes to amending the “Securities Law”, control over equity structure, conditions for issuance and listing, incentive system, and others should be loosened. In terms of designing the systems of the board of strategic emerging industries, differentiated arrangements for listing conditions, trading, regulation, corporate governance and operation, and other aspects should be made as well.
Third, the system of pension funds’ investment and operation in the capital market should be improved. It is suggested that individual accounts should be funded, and all funds should be coordinated to supplement capital of individual accounts by way of transferring state-owned shares, putting into state budget, shares transfer for state-owned enterprises’ listing. Measures for management on pension funds’ investment and operation should be worked out as soon as possible, and market-oriented investment and operation should be allowed for maintenance and appreciation of values. Moreover, enterprise annuities should be propelled by increasing the ratio of tax preference and gradually loosening the limit to the proportion of investment in the capital market.