Regulator issues guideline to boost return, confidence of investors

China has unveiled the first-ever systemic guideline focusing on urging A-share listed companies to adopt measures to raise their market value when necessary, a concrete step to improve investor return and confidence.

The China Securities Regulatory Commission released the guideline for listed company market value management on Friday, effective immediately, requiring the firms to enhance their investment value and their ability to provide shareholder returns on the basis of improving the quality of the company.

"When necessary, listed firms shall actively take measures to boost investor confidence and to promote the investment value of the firms to reasonably reflect their quality," the guideline said.

The measures that can be taken include mergers and acquisitions, equity incentives, employee stock ownership plans, cash dividends, investor relations management, information disclosure and share buybacks.

Specifically, companies that are members of major indexes, including the CSI 300 Index, shall formulate and disclose rules for market value management, clarifying the duties of directors and senior managers and setting out the response measures in scenarios of stock prices falling continuously or sharply in a short period.

Meanwhile, the guideline said that companies trading below their net asset value for 12 months in a row shall formulate and disclose a valuation improvement plan and evaluate effects of the plan at least annually.

If a major index component company or a company persistently trading below its book value fails to disclose the above rules and plans, the regulator shall take measures such as ordering a correction, regulatory talk and issuing a warning letter according to law.