CITIC SEC: Multiple policies of the China Securities Regulatory Commission are being implemented, continuously optimizing the market ecosystem. It is recommended to focus on the merger and acquisition opportunities of central state-owned enterprises in emerging industries.

CITIC SEC released a research report stating that the China Securities Regulatory Commission (CSRC) has successively issued guidelines on market capitalization management, opinions on mergers and acquisitions of listed companies, and other documents, continuing the policy ideology of previous capital market reforms. On one hand, the documents focus on requirements for companies listed in major indexes and companies with a long-term low market value, considering that the proportion of companies with a long-term low market value exceeds 20% currently. It is expected that actions related to market value management for these companies will continue to accelerate. On the other hand, the documents focus on supporting new productive forces, industry integration, and emphasize optimizing payment, pricing inclusiveness, and other supporting policies. In combination with the State-owned Assets Supervision and Administration Commission's requirements to optimize the layout of state-owned capital, it is suggested to pay attention to merger and acquisition opportunities for central SOEs in emerging industries. Key points from CITIC SEC: Events: On September 24, the CSRC successively released the "Guidelines for Market Value Management for Listed Companies (Draft for Solicitation of Comments)" and the "Opinions on Deepening the Market Reform of Mergers and Acquisitions of Listed Companies." These documents are implementation measures of the policies announced at the State Council Information Office press conference on September 24, and it is recommended to continue to pay attention to the guidance that the CSRC and other departments are about to formulate "Guidance on Promoting the Entry of Medium- and Long-term Funds into the Market." Regarding market value management, the guidelines focus on specific requirements for companies listed in major indexes and companies with long-term low market value. It is calculated that the proportion of companies with long-term low market value currently exceeds 20%, prompting companies to accelerate their market value management operations. - Major index component companies should establish and publicly disclose market value management systems, clarify specific responsibilities, internal assessment and evaluation, and response measures in case of abnormal stock price drops. They should provide special explanations on the implementation of the system at annual performance briefings. Other listed companies can refer to this. It is estimated that 660 companies may be affected if this measure is implemented, accounting for 3.6% of market value, with relatively limited impact. - Companies with long-term low market value should disclose valuation enhancement plans. A company is considered to have long-term low market value if its closing price is lower than its audited net asset value per share for twelve consecutive months. According to calculation, there are currently 274 companies that meet this criteria, accounting for approximately 20.50% of market value, with 52 being index component companies, accounting for 17.42%. Regionally-owned enterprises have the highest number of long-term low market companies, reaching 120. Private enterprises and central SOEs have 63 and 53 companies respectively, but in terms of ownership, the proportion of central SOEs with long-term low market value reaches 11%, significantly higher than that of private enterprises. In addition, the guidelines also specify the responsibilities and obligations of the board of directors, directors, senior management, controlling shareholders, and other relevant entities of listed companies. For example, the board of directors is encouraged to establish and disclose medium- and long-term dividend plans, while directors and senior management can create and disclose such plans under certain conditions, and implement share acquisition plans, etc. Regarding mergers and acquisitions, the opinions mainly support the development of new productive forces and industry integration, emphasizing the optimization of payment, pricing inclusiveness, and other supportive policies. In alignment with the guidance to optimize the layout of state-owned capital from the State-owned Assets Supervision and Administration Commission, it is recommended to focus on merger and acquisition opportunities for central SOEs. The opinions continue the core spirit of the previously issued documents by the CSRC, such as the "Sixteen Measures to Serve the High-level Development of Technology Companies in the Capital Market" and the "Eight Measures to Deepen the Reform of the Sci-Tech Innovation Board to Serve the Development of Technology Innovation and New Productive Forces." In terms of direction, on one hand, the opinions emphasize support for the development of new productive forces, such as supporting mergers and acquisitions of upstream and downstream assets of companies listed on the Sci-Tech Innovation Board and Growth Enterprise Market, support for cross-industry mergers of well-operated listed companies, etc. At the same time, the opinions propose the implementation of a "reverse linkage" of investment period of private equity funds and the lock-up period of shares obtained through restructuring. This means that the longer the investment period of the fund, the shorter the lock-up period, allowing for quick exit of funds. On the other hand, the opinions propose to increase support for industry integration, including the integration of leading companies with companies in the industrial chain, and private equity funds lawfully acquiring listed companies to promote industrial integration. By considering the guidance on optimizing the layout of state-owned capital from the State-owned Assets Supervision and Administration Commission, it is suggested to pay attention to opportunities for specialized integration led by central SOE groups in traditional industries and outbound mergers in forward-looking strategic emerging industries. Furthermore, the opinions encourage the comprehensive use of stocks, directed convertible bonds, cash, and other payment tools for mergers and acquisitions, as well as increasing inclusiveness in pricing, related transactions, etc. It is expected that more cases of mergers and acquisitions will continue to be realized. It is recommended to continue to pay attention to the upcoming "Guidance on Promoting the Entry of Medium- and Long-term Funds into the Market," and to focus on efforts in developing equity mutual funds, improving the environment for "long money long-term investment," and continuously improving the ecosystem of the capital market. The cultivation and development of patient capital is closely related to the development of new productive forces, promoting long-term and sustainable industrial development, and stabilizing market expectations. According to statistics, by the end of August this year, equity mutual funds, insurance funds, various pension funds, and other professional institutional investors collectively held nearly 15 trillion yuan of A-share market capitalization, accounting for 22.2% of the A-share market capitalization. However, there is still room for improvement. As Chairman Wu Qing mentioned at the press conference on September 24, it is expected that efforts will be made to develop equity mutual funds, improve the environment for "long money long-term investment," and continuously improve the ecosystem of the capital market in the future. This includes fully implementing assessments with a period of over three years, removing institutional barriers that affect insurance funds' long-term investment, and accelerating the construction of a multi-tier and multi-pillar pension system. Risk factors: Economic slowdown risk; policy implementation not meeting expectations; capital market reform not meeting expectations.