China’s A-Share Market Soars 58% Thanks to New Stabilizing Policies 🚀📈 - 🌍NewspaperAmigo

China's A-share market, celebrating its 35th anniversary this year, has achieved impressive milestones. In 2023, the total market capitalization reached a staggering $10.89 trillion, ranking it second only to the U.S.¹ .

After peaking at 3,731 points on February 18, 2021, the Shanghai Composite Index experienced a dip, sliding 6.3% from January 29 to February 5, 2024. However, thanks to a series of strategic measures by the China Securities Regulatory Commission (CSRC), the market bounced back and surged by 58% for the rest of the year .

The CSRC's tightening measures in the latter half of 2023 included hiking the margin requirement for securities lending, restricting share reductions for companies without recent dividend distributions, and suspending restricted share loans. Initially, these measures faced a 6.3% decline, but as the market absorbed the policy intentions, optimism grew, leading to a robust bull run .

One of the critical challenges addressed by these policies is the supply-demand imbalance in the A-share market. Over the past decade, equity financing surged by 182%, reaching 12.92 trillion yuan ($1.81 trillion), while China's GDP grew by an average of 6.8% annually. With total debt financing skyrocketing to 5.32 times GDP, the market faced significant pressure.

To mitigate these issues, the CSRC paused initial public offerings (IPOs) and seasoned financing since September, leading to a decline in equity financing from 664.9 billion yuan to 212.8 billion yuan in just six months. These pauses helped stabilize the liquidity market and gave authorities time to develop long-term strategies for balanced growth .

Beyond stabilization, the CSRC has pushed for listed companies to enhance investment value through share buybacks, increased dividend distributions, and support for mergers and acquisitions (M&A). By encouraging high-quality assets and shedding less productive capabilities, these measures aim to attract both day traders and long-term investors back to the market .

If these policies are effectively implemented, China's A-share market is poised to become a more attractive and productive environment for investors worldwide. Stay tuned as China continues to innovate and stabilize its financial landscape!