The interconnectedness of investment and financing is a fundamental pillar in the evolution of capital markets, particularly critical in driving high-quality development and enhancing internal stabilityRecent discussions have emphasized the importance of striking a balance between quantitative growth, qualitative improvements, and effective checks and balances in the financial ecosystem.

Investment and financing are two sides of the same coin, mutually reinforcing each other to propel economic growthA robust capital market not only serves as a platform for quality enterprises to secure capital but also ensures that investors receive stable returns on their investmentsHowever, a closer look at the current landscape reveals a significant imbalance in the investment and financing functions within China's capital marketDespite witnessing more than 1,500 new companies listed since 2020 and holding the top spot globally for financing amounts in 2022 and 2023, major stock indices have struggled, leaving ordinary investors feeling dissatisfied and disconnected.

Achieving a comprehensive balance between investment and financing is essential for capital markets to play their critical role in economic development

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Key to this is implementing strategies that accelerate the entry of long-term funds into the marketWu Qing suggested that it's vital to expedite the execution of guidelines that facilitate long-term capital investments and bolster the development of equity mutual fundsThis involves identifying and addressing the obstacles that hinder long-term funds from participating in the market, effectively creating a policy framework that supports sustainable investments.

Recently, various stakeholders have collaborated to enhance liquidity in the capital markets, thereby enlarging the pool of long-term fundsFor example, on October 18, innovative monetary policy tools aimed at supporting the capital market were officially introduced, including measures that enable securities, fund, and insurance companies to engage in swaps and stock repurchasesJust a few days later, on October 20, 23 listed companies announced their agreements with banks to obtain loan commitments specifically for stock repurchases and increases in holdings

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Furthermore, the People's Bank of China confirmed the successful initiation of swap operations amounting to 50 billion yuan on October 21st, a significant move towards stabilizing the market.

According to Shen Juan, the Chief Analyst at Huatai Securities, the introduction of these structural monetary policy tools holds substantial significance for the development of capital marketsThese measures are poised to enhance the ability of participating institutions to secure funding and increase stock holdings while allowing companies to conduct buybacks effectivelyThis influx of stable capital will help moderate market volatility and strengthen internal stability.

A foundational aspect of achieving a broad balance in investment and financing, as noted by Wu Qing, lies in implementing a comprehensive set of financial strategies that further develop the market's capabilitiesThis includes refining the mechanisms that coordinate the primary and secondary markets to ensure that the scale and pace of market financing are clinically balanced and rational.

The consensus among industry experts is that enhancing coordination between the primary and secondary markets could lead to a normalization of IPOs

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In the preceding period, the market experienced low activities, and trading sentiments were muted; thus, the pace of IPOs and refinancing slowed to mitigate the impact of equity financing on liquidity in the secondary marketHowever, as market activity gradually picks up and investor confidence starts to rebound, it’s essential to prioritize a scientifically rational approach to maintain a consistent pace of new stock issuanceThis could help restore the capital market's core financing functions while fostering a balance between investment and financing.

Turning to qualitative enhancements, it’s imperative to recognize that publicly listed companies form the backbone of the market and are central to value creationTo solidify the foundation for coordinated development in investment and financing, it’s crucial to focus on improving the quality of these listed entities

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This entails guiding them to leverage various instruments available in the capital market, such as mergers and acquisitions, to enhance their core competitiveness and uphold their responsibilities in managing their market capitalization.

To reinvigorate the mergers and acquisitions market, targeted efforts are planned to amplify this trend in September 2024. Strategies will focus on supporting new productive capabilities, intensifying industrial consolidation initiatives, increasing regulatory tolerance, enhancing payment flexibility and review efficiency, upgrading the service levels of intermediary institutions, and strengthening regulatory oversightSuch moves are geared towards establishing a more robust industrial structure while boosting efficiency in resource allocation.

A noteworthy illustration of this trend can be seen with Nanhua Instruments, which announced plans on October 11 to acquire between 36% to 45% of shares in Jiade Li, aiming to gain control over the company

This acquisition signifies Nanhua's intent to expand its operational scope into the digital and intelligent cleaning equipment sector, crafting the company’s second growth trajectory, and strengthening its overall competitiveness.

Chen Gang, Chief Strategy Analyst at Dongwu Securities, asserts that effectively utilizing mergers and acquisitions as a strategic tool can foster synergistic benefits among industrial resources, regional fiscal policies, and capital markets—ultimately driving high-quality developmentA merger strategy grounded in industry logic can enhance scale efficiency and promote industry concentration while fostering vertical integration and collaboration, enhancing resilience and global competitiveness.

Market capitalization stands as one of the pivotal indicators reflecting both the growth and intrinsic value of listed companiesIn September, there was a renewed call for these companies to meticulously manage their market values while increasing investor returns, prompting enthusiasm

Numerous companies responded positively by undertaking initiatives to improve both quality and returns, showcasing record-high dividend payouts, significant increases in share buybacks, and a concerted effort to host performance briefings, with over 95% of companies participating.

Professor Tian Lihui from Nankai University emphasized the necessity for listed firms to assume their responsibilities seriously, balancing investor returns with compliance and ethical practicesHe highlighted the importance of understanding the legal boundaries of market value management, underscoring that companies must not exploit this concept to engage in unethical practices such as market manipulation or insider trading.

As discussions around rights and responsibilities take center stage, investor confidence has been somewhat rattled by recent disclosures regarding share reduction across various listed firms

Analysts have pointed out that while some companies have faced scrutiny, the overall data does not suggest a rampant trend of illicit share reductionsIt remains paramount to maintain a vigilant regulatory approach to manage compliance adequately while assuring stakeholders that shareholders' rights will be preserved and enhanced.

For investors, the establishment of effective checks and balances in rights and responsibilities is criticalClear delineation of roles and duties in investment and financing must be mandated, ensuring that regulations are adhered to while protecting investor interestsStakeholders in the financial ecosystem—especially larger shareholders and senior management—must maintain a high standard of accountability and ethical behavior, safeguarding the interests of smaller shareholders while refraining from exploiting loopholes for personal gain.

To address these issues moving forward, rigorous measures are slated to be implemented in May 2024 to further regulate shareholder reductions, closing any potential avenues for evasion