□ during the 14th Five Year Plan period, China will accelerate the construction of a modern market economy system. Under the new development concept, common prosperity will become an important feature of Chinese modernization; The marketization of innovative elements such as science, technology and data will become an important direction of deepening reform; Under the guidance of “double carbon” goal, the economy and society will accelerate the transformation and development to green. The new development concept will make a series of important changes and innovations in the logic of capital investment.
□ in the past, the measurement of capital cost mainly focused on the cost reflected in the financial statements. At present, it is gradually expanding to include the value cost of social, ecological and cultural ideas generated in the process of enterprise production and operation activities, as well as the related costs affecting people’s all-round and healthy development. Many external social costs, ecological costs and cultural costs are accelerating internalization, and the concept of large cost of capital investment is gradually taking shape.
□ as human society enters the stage of science and technology and digital smart capital, the dependence of capital formation on traditional profits and debts decreases. Enterprises can realize rapid capital accumulation and leapfrog expansion in a short time with the help of smart capital and knowledge capital. The change of capital formation model poses new challenges to investment value evaluation.
Since the covid-19 pneumonia epidemic in the world, domestic and foreign capital market investment has shown a series of new changes. Global quantitative easing has made low and negative interest rates the norm, and the traditional investment theory and asset pricing methods are facing great impact; After the trend rise of China’s capital market in 2020, the market trading style this year also shows obvious structural switching characteristics. During the 14th Five Year Plan period, China will accelerate the construction of a modern market economy system. Under the new development concept, common prosperity will become an important feature of Chinese modernization; The marketization of innovative elements such as science, technology and data will become an important direction of deepening reform; Under the guidance of “double carbon” goal, the economy and society will accelerate the transformation and development to green. The new development concept will make a series of important changes and innovations in the logic of capital investment.
I. the position of equity capital investment was further improved under the low interest rate environment
Since the outbreak of covid-19 pneumonia in the global pandemic, the position of equity capital investment in the global market has continued to rise. Affected by the global quantitative easing after the outbreak, the bond yield represented by US Treasury bonds continued to decline, the yield of us 10-year Treasury bonds fell to the lowest 0.52% in history, and the yield of 30-year treasury bonds also fell below 1%. In August this year, the yield of German 10-year Treasury bond further fell to – 0.54%, and the yield of 30-year treasury bond also fell below zero. At the same time, the global equity market continued to rise. Since last year, the US NASDAQ index, Dow Jones index and S & P 500 index have continued to hit record highs. As of December 20, the major stock indexes of the United States had increased by nearly 20% over the beginning of the year, and the global asset allocation showed a trend of accelerating the accumulation of equity investment.
Three factors have further promoted the position of global equity capital investment. First, the expansion of global debt capital is too fast. Since the outbreak, global debt has increased by US $24 trillion, and the total global debt has reached US $281 trillion, which is 355% of the world’s GDP. Excess liquidity has led to the continuous decline in the rate of return on debt capital, and global investors have paid more and more attention to equity capital. Second, short-term capital surplus. In recent years, China’s savings rate has continued to be higher than the investment rate, and the capital structure has obvious characteristics of “one more and three less”, that is, there are more short-term liquidity funds, and there are less funds willing to bear business risks, can be used by enterprises for a long time, and continuously increase to supplement enterprise equity. The demand for debt investment is further suppressed by short-term excess liquidity. Third, equity investment driven by science and innovation obtains a high risk premium. At present, the world is in a new round of scientific and technological revolution. The development of innovative elements such as technology, digital and science and technology needs the help of equity investment to realize risk dispersion and income sharing. Equity investment replaces creditor’s rights or credit financing and becomes an important force to promote scientific and technological innovation. The status of equity capital investment continues to improve in the world.
II. Accelerated integration of securitized and non securitized capital
In the past, the degree of capital securitization in China was low, mainly debt capital securitization. At present, the scale of debt capital in China is large, and the total liabilities of enterprises have reached more than 130 trillion yuan, mainly including securitization debt capital, mortgage-backed loans and pure credit debt capital. Among them, the proportion of securitization debt capital is relatively low. Up to now, the stock of credit bonds is less than 13 trillion yuan, accounting for less than 10% of debt capital. Debt capital mostly exists in the form of bank loans. As of November 2021, the loan scale of Chinese enterprises is about 122 trillion yuan, about 10 times that of credit bonds. At the same time, many indirect financing instruments show the trend of securitization. For example, although mortgage loans are lent through banks, they are mainly borne by the users of funds, which has the characteristics of direct financing. In addition, enterprises also promote debt capitalization through ABS and other means. Up to now, the market stock of ABS has exceeded 5 trillion yuan.
Since last year, the process of securitization in China’s equity market has accelerated. Since the pilot registration system reform of the science and innovation board in 2019, the capital market has expanded rapidly. By the end of November 2021, the number of listed companies on the science and Innovation Board had reached 362, with a total market value of 5.5 trillion yuan and a total raised capital of 629 billion yuan. In the two years since the establishment of the science and innovation board, the new equity financing scale in the A-share market is about 4.4 trillion yuan, which is about the total financing scale from 2016 to 2018. At the same time, the establishment of Beijing stock exchange will complement the last territory of the multi-level capital market system and further promote the expansion of the securities market. At present, China’s new third board has 6941 listed companies, including 1225 innovation level companies and 5716 foundation level companies. With the shift of selected level companies to the Beijing stock exchange, China has formed a new pattern of three major exchanges with Shanghai and Shenzhen Stock Exchange and Beijing stock exchange. The accelerated securitization of the equity market has significantly improved the linkage of investment in the primary market and the secondary market. The valuation of investment projects in the primary market is largely affected by the target or industry valuation of the secondary market. The selection of investment assets in the primary and secondary markets is also increasingly similar. There are more and more asset management institutions linked by the primary and secondary markets. Previously, public fund-raising management institutions focusing on the secondary market have begun to actively layout private investment in the primary market, Some equity investment institutions in the primary market are also actively arranging public fund-raising management business in the secondary market, accelerating the integration of public asset management and private asset management, and accelerating the overall process of China’s capital securitization.
III. The large cost view of capital investment appears, and the external cost is internalized
In recent years, the global attention to social issues such as climate and environment has been raised to a new level. China has also clearly put forward the “double carbon” goal of “striving to achieve carbon peak by 2030 and carbon neutralization by 2060”. Externality cost internalization has become the focus of global financial markets. In the past, the measurement of capital cost mainly focused on the cost reflected in the financial statements. At present, it is gradually expanding to include the value cost of social, ecological and cultural ideas generated in the process of enterprise production and operation activities, as well as the related costs affecting people’s all-round and healthy development. Many external social costs, ecological costs and cultural costs are accelerating internalization, and the concept of large cost of capital investment is gradually taking shape.
Among them, three types of external costs are accelerating internalization. One is the cost of carbon. In the second half of this year, China’s carbon trading market was officially launched. As of October 8, its turnover exceeded 800 million yuan and its trading volume exceeded 17 million tons. The green premium brought by carbon emission and carbon cost under the “double carbon” strategy will become an important factor affecting the production, operation and investment decisions of enterprises. Second, the cost of ecological environment. In 2018, the State Council proposed to include the eco-environmental cost into the economic operation cost, establish a dynamic adjustment mechanism for urban sewage treatment fee, establish a differentiated charging mechanism for enterprise sewage discharge, and encourage local governments to charge differentiated charges according to the specific conditions such as the type and concentration of main pollutants in enterprise sewage discharge and environmental protection credit rating. This year, the central office and the State Council Office issued the opinions on deepening the reform of ecological protection compensation system to improve the classified compensation and comprehensive compensation mechanism. Ecological cost will become an important factor affecting the operation of enterprises. Third, the cost of social governance. It mainly refers to the costs incurred by enterprises in performing social responsibilities and participating in social governance in the production process, including the supply of resources during the epidemic and the costs incurred from participating in pension, poverty alleviation, disability assistance, environmental protection and other activities through the purchase of services by the government.
Globally, as early as 2004, the United Nations Environment Programme put forward the ESG (environmental, social and corporate governance) principle. By 2020, the global ESG investment scale has reached US $37.8 trillion. ESG investment has become an important investment strategy in the capital market. According to the survey and statistics of MSCI, 79% of the investment institutions with a management scale of US $200 billion have adopted ESG investment strategy. The change of capital cost brought by ESG is also affecting the logic of domestic capital operation. More and more asset management institutions incorporate ESG into the investment strategy framework. Among China’s public funds, there are nearly 140 funds with the concept of Pan ESG investment, with a total scale of about 160 billion yuan.
Fourth, the logic of factor distribution is changing, and the proportion of capital factor distribution may decline
Promoting common prosperity is the essential requirement of socialism, and improving the factor distribution structure is an important measure to promote the construction of common prosperity. At present, the distribution of labor factors in China accounts for less than 50%, which is relatively low; The proportion of capital factor distribution is as high as nearly 20%, which is significantly higher than that of nearly 10% in Western economies. Although the proportion of capital factors in China is too high, the rate of return on capital is relatively low. At present, the profits of China’s Industrial Enterprises above designated size are only more than 70000 billion yuan. It is roughly estimated that the average return on total assets of China’s local state-owned enterprises is only about 3%. The construction of common prosperity changes the logic of capital distribution to a certain extent. The value of capital elements should not only look at the profits created by enterprises, but also pay attention to whether the value creation of enterprises comes from the innovation ability of enterprises or reduce the cost of labor factors.
It is emphasized that common prosperity is not the basic principle of changing the distribution of market economy, but improving the tertiary distribution structure and increasing the proportion of labor factors in the primary distribution. The initial distribution is the factor price determined according to the relationship between supply and demand. At present, the scale of China’s initial distribution is about more than 90 trillion yuan, but the distribution of labor factors accounts for less than 50%. Redistribution is to correct the unfair phenomenon in the initial distribution by means of Taxation and social security. At present, China’s redistribution scale is about 15 trillion yuan to 20 trillion yuan, which is smaller than the initial distribution scale. In the future, we will promote redistribution to the resident sector by strengthening the regulation of Taxation, social security and other policies. In the west, the three distributions are mainly social donations, while in China, they are more extensive and diverse, including community and other social grass-roots organizations, hometown associations and classmates’ associations with blood and family relations. However, at present, China’s direct social donation is only 150 billion yuan, accounting for only 0.15% of GDP. When the scale of the three distributions is small and the adjustment of the redistribution is difficult, the improvement of the factor distribution structure mainly starts from the initial distribution, adheres to the distribution according to work as the main body, and improves the proportion of labor factors in the initial distribution. On the one hand, at present, the distribution proportion of labor factors in China is low, and there is still some room for improvement compared with the proportion of more than 60% in overseas mature markets; On the other hand, with the development of high-end labor and intellectual labor, the importance of labor factors in production factors will increase day by day. In contrast, the proportion of capital factors in factor distribution will show a downward trend.
Fifth, we should set up “traffic lights” for capital, and the expansion of capital has boundaries
Expansibility is one of the basic attributes of capital. To a certain extent, capital expansion can quickly promote the global division of labor and improve the global labor productivity, but it is also easy to lead to systemic risks such as market monopoly and too big to fail. In the past few years, Internet platform enterprises have developed rapidly with the help of capital expansion. The business field of large platform companies has penetrated into all links of residents’ life and social services, showing the trend of platform monopoly. Since the beginning of this year, China has issued a series of measures to guide the development of platform companies and oppose the disorderly expansion of capital, so as to promote fair competition in the market to the greatest extent. On the one hand, China continues to encourage capital innovation and development, with the combination of the government and the market, increase the protection of intellectual property rights and enterprise innovation, and continue to stimulate the innovation vitality of small and medium-sized enterprises. On the other hand, China is also accelerating the definition of the boundary of capital. The central economic work conference clearly proposed to set up a “traffic light” for capital, focusing on government supply in public services such as education, medical treatment, culture, public sports and elderly care, and gradually establish a negative list to clearly prohibit entry and conditional entry; In the field of ecological resources and environment, it is necessary to protect biodiversity, establish a complete boundary system for safeguarding natural ecological security, delimit “three lines and one order”, crack down on all kinds of behaviors that damage ecology and pollute the environment, and prevent over exploitation of capital; In terms of military industry and national security, we should not only encourage private capital to enter, but also ensure national defense security. Under the guidance of orderly capital expansion, the scope and boundary of capital investment are changing.
Sixth, the ability of capital to create its own market is improving
Different from the past capital seeking market, the ability of capital self creating market is significantly improved under the new business state. In addition to traditional supply to meet demand, capital is also accelerating the creation of demand, and demand leads supply, forming a new balance between supply and demand. The new supply relationship has attracted extensive attention. For example, short videos, e-sports, medical beauty, live broadcasting and goods are the markets created by capital itself. By the end of 2020, the number of short video users in China had reached 873 million, accounting for 88.3% of the total Internet users, playing an important and positive role in driving rural tourism and promoting Shenzhen Agricultural Products Group Co.Ltd(000061) sales. The gathering of capital and the blessing of Internet giants have further stimulated the expansion of its market demand. New energy vehicles also adopt a similar model. Compared with the traditional automobile industry mainly producing and manufacturing automobiles, it takes the future consumption scenario model of automobiles as its core competitiveness, drives automobile consumption culture and other needs, and creates a series of new demands.
The demand for self creation of capital has two sides. On the one hand, such demand is uncertain and cannot exist stably for a long time; On the other hand, we should consider whether it conforms to the guidance of human life and health. In the first half of this year, China Re examined the industries encouraged in the early stage such as e-sports, animation and medical beauty. The State Administration of Market Supervision issued the law enforcement guide for medical beauty advertising (Draft for comments), which clearly pointed out that it would focus on cracking down on the top ten chaos in medical beauty advertising. Therefore, when investing in emerging business forms and new economy, we should not only consider the huge market demand and market space stimulated by capital innovation, but also consider its uncertainty and whether the corresponding health orientation, life orientation and value orientation are reasonable.
VII. The value of modern smart capital needs to be revalued
The structure and mode of action of capital are changing, the status of traditional capital elements is declining, and the status of intelligent capital and knowledge capital attached to labor force is significantly improving. First, the business model of enterprises is changing, and platform, digital and hub enterprises are developing rapidly. Platform enterprises gather a large number of enterprises through the establishment of platforms to form an emerging enterprise type with internal and external competitive advantages. Second, digital enterprises are developing rapidly. The definition, statistical standards, power confirmation, pricing, trading and supervision of digital economy are gradually clarified and standardized. In the future, with the improvement of the market-oriented allocation mechanism of factors and the rapid development of the market of movable property factors and innovation factors represented by technology and numbers, the status of technology capital, intelligent capital and knowledge capital attached to the labor force will be significantly improved, and will become the key factor affecting the judgment of investment value.
The change of capital formation model poses new challenges to investment value evaluation. In the past, capital formation mainly depended on enterprise profits, and enterprises continued to turn profits into capital. In recent years, with the development of modern financial system, debt expansion has become the main form of capital formation, and the debt ratio of enterprises has been continuously improved. Financial leverage and cash flow management have become important factors to evaluate the operation risk of enterprises. At present, as human society has entered the stage of science and technology and digital intelligent capital, the dependence of capital formation on traditional profits and debts has decreased. Enterprises can realize rapid capital accumulation and leapfrog expansion in a short time with the help of intelligent capital and knowledge capital.
The change of capital formation mode makes us have to revalue three types of value when investing in enterprises. First, the value evaluation of science and technology innovation enterprises should focus on the technology realizable path. Starting from the connection mechanism between science, technology and industry, judge whether the technology realization path is feasible from a scientific point of view, and conduct valuation accordingly. The second is to revalue the value of innovative elements such as data and technology. At present, the understanding of investment valuation on the revaluation of industrial chain value brought by data and digitization is relatively insufficient. The value of data elements should be measured based on the new investment concept and value evaluation system. The third is to revalue the value of the leaping development model of enterprises, which should jump out of the traditional evaluation logic of cash flow discount and scale expansion, and pay attention to the influence of factors such as intelligent capital, knowledge premium and technology premium. At the same time, we should also consider that the life cycle of innovative enterprises is short. At present, 95% of China’s small and medium-sized enterprises have an average life span of only 2.5 years. The more enterprises focus on the forefront of science and technology, the higher the uncertainty. Risk factors should also be fully considered in the value evaluation of leapfrog enterprise development model. ( Shenwan Hongyuan Group Co.Ltd(000166) securities Yang Changcheng)
(Shanghai Securities News)
