Securities watchdog to better monitor nation's stock markets

As regulators unveil more guidelines and policies to stabilize stock markets and economic growth, market mavens have expressed greater optimism regarding the performance of A shares this year.

The China Securities Regulatory Commission, the country's top securities watchdog, said at a work conference on Monday that it will step up joint monitoring and supervision of the country's stock, exchange-traded and over-the-counter markets, as well as the futures and spot markets.

The CSRC will also work closely with the People's Bank of China, the country's central bank, to better use structural monetary tools.

Comprehensive reforms concerning the investment and financing functions of the Chinese capital market will be deepened. The inflow of medium to long-term capital will be made smoother. More policies will be introduced to facilitate the development of new quality productive forces. The various connect programs will be expanded to further enhance the competitiveness and appeal of the A-share market, according to the CSRC.

The regulator said the investment value of the Chinese capital market will be more noticeable as China's macroeconomic policies become more active, and that stronger-than-expected countercyclical adjustments will be further strengthened this year.

The market responded positively to the news on Tuesday.

The benchmark Shanghai Composite Index gained 2.54 percent to close at 3,240.94 points, while the Shenzhen Component Index jumped 3.77 percent. Total trading value at the Shanghai and Shenzhen exchanges reached 1.35 trillion yuan ($180 billion), nearly 40 percent higher from the day earlier.

Over 5,300 companies reported gains on Tuesday, with more than 150 of these hitting their daily price limit of 10 percent.

Securities brokerages, which are considered "bull market flag bearers" among A-share investors, saw prices surge 3.79 percent on average.

Meng Lei, China equity strategist for UBS Securities, expressed a relatively optimistic outlook on the performance of the A-share market this year.

One reason is supportive policies, including more active fiscal policies, which can be expected after the upcoming annual two sessions, and moderately relaxed monetary policies.

The other reason is companies' improving profitability.

Meng expects that constituent companies of the benchmark CSI 300 Index will report an annual profit increase of 6 percent this year. He also anticipates more policies to facilitate the transformation in industries facing overcapacity at present, which will help buoy the prices of A shares.

UBS will prefer A-share technology companies for 2025. The relaxed credit environment in China will benefit these liquidity sensitive companies. China's continued stress on technology self-reliance and the global artificial intelligence boom will also help drive up these companies' share prices, said Meng.

A-share software developers were the major contributors to Tuesday's rally, reporting an average daily increase of 7 percent. This is largely due to the overnight boom of the Chinese social media app Xiaohongshu, which rose to be the most-downloaded app in Apple's US App Store on Monday with a ban on TikTok looming.

Eric Nie, head of investment at China Asset Management Company of Fidelity International, also expressed cautious optimism for the A-share market in 2025.

The A-share market's valuation is attractive now, both compared to its historic levels and other markets. International investors' allocation to China assets, which bear lower correlation to other global assets, is quite low at present. Therefore, overseas capital is likely to return in 2025, increasing their exposure to the core assets in China, said Nie.

While favoring A-share technology, high-end manufacturing, consumption and healthcare companies, the investment value of companies generating stable dividends is also worth noting this year as central regulators emphasize returns to investors, according to Nie.

A-share companies paid a total of 2.4 trillion yuan in dividends last year, a new high, the CSRC said on Monday.

David Huang, senior investment strategist at asset manager AllianceBernstein, said that consumption's contribution to China's GDP is relatively lower when compared to most developed countries as well as some emerging economies.

In this sense, there is room for more policies to stimulate consumption this year that will boost economic growth and inject more confidence into the stock market, he said.