Listed companies face challenges in structural transformation, quality improvement: head of Shenzhen Stock Exchange
Published: Nov 23, 2022 01:03 AM
Shenzhen Stock Exchange Photo:VCG

Shenzhen Stock Exchange Photo:VCG

Currently, listed companies face new challenges in structural transformation, quality improvement and efficiency improvement, the head of the Shenzhen Stock Exchange (SZSE) said on Tuesday at the 2022 Financial Street Forum.

The present and near future will still be an important period of opportunities for the high-quality development of listed companies, said Sha Yan, president & CEO of SZSE, on Tuesday when addressing the 2022 Financial Street Forum, an annual financial event that opened in Beijing on Monday and that will run through Wednesday.

"The SZSE will further promote the implementation of a new round of an action plan to improve the quality of listed companies, with high-quality improvement of the system, supervision and service," said Sha.

Sha noted that the cost pressure, slow recovery of consumer demand and other conditions are worth paying attention to, although positive market factors gradually increased in the first three quarters in 2022, with the upstream and downstream profit structure continuing to improve, so the overall recovery trend of Shenzhen-listed companies is good.

For some companies, the urgency of promoting structural transformation and improving quality and efficiency is greater. In this process, some obstacles to development need to be addressed, said Sha.

The SZSE head specially pointed out major problems facing listed firms: lack of focus on the main business, lack of investment in State-owned enterprises (SOEs), and functions of intermediary institutions not being put to good use. 

Sha noted that some companies still have a tendency of blindly diversifying through mergers and acquisitions, and some new businesses are seriously separated from the main business.

After restructuring, the integration effect was not good in some cases, and the company failed to focus on the main business. This trend has been particularly noticeable in the game and film industries, and more recently in the chip and new-energy sectors, said Sha.

He also pointed out the value discovery and resource allocation function of the market for SOEs still needs to be improved. 

2022 marks the end of a three-year period of SOE reform. Shenzhen-listed SOEs in the past three years achieved a compound growth rate of 18 percent in operating revenues, while their growth in net profit reached 35 percent, higher than the overall level of the market. 

According to Sha, such achievements fully demonstrated the role of stabilizer and ballast stone played by SOEs. However, due to the influence of corporate-investor relationship management, institutional roadshow publicity and inadequate market recognition, there were less market resources allocated to SOEs, and this needs to be improved.

Apart from listed companies, Sha noted that the function of intermediary institutions is not fully realized. With the increase in the number of listed companies, there is a growing demand for resources and industry integration through high-quality capital operation. However, the development of professional intermediaries and financial instruments has not yet matched this. Intermediaries such as underwriting, financial consulting, audit evaluation and legal services need to continue to improve their level of practice and sense of responsibility.

The good news is that the quality and structure of the market have been steadily improved, showing the "new engine" of innovation and high growth. And previous and ongoing efforts have shown their effects. 

The channels of investment and financing have been expanded. Over the past two years, the pilot registration system of the SZSE ChiNext market has made remarkable progress. As of October, the ChiNext market IPO and refinancing under the registration system had raised more than 720 billion yuan ($101 billion). 
In April 2021, the main board of the SZSE and the small- and medium-sized board successfully merged. So far, the total value of IPOs and refinancing has reached more than 410 billion yuan. 

Shenzhen has raised more than 470 billion yuan in innovative green financial products, and issued more than 28 billion yuan in innovation and entrepreneurship bonds and science and technology innovation bonds. 

In July 2022, the SZSE launched the Shenzhen-Switzerland Stock Connect, which is seen as a way to facilitate mutual recognition of Chinese and Swiss market systems and help enterprises make use of both domestic and international markets and resources to enhance corporate performance.