(Source: "Securities Daily" 2024-09-26)
Recently, a number of public equity institutions announced adjustments to the stock valuations of Guotai Junan and Haitong Securities held by their funds.
Paipai.com wealth manager Yao Xusheng said in an interview with a reporter from Securities Daily that the main purpose of adjusting the valuation methods of the two suspended stocks is to accurately and timely reflect the asset value of these stocks and protect the interests of investors.
Many fund managers adjust valuations of suspended stocks
On the evening of September 5, Guotai Junan and Haitong Securities both announced that Guotai Junan and Haitong Securities were planning for Guotai Junan to absorb and merge Haitong Securities and issue shares to raise supporting funds. The two companies will be suspended from trading on September 6 when the market opens.
These two stocks are still suspended. Chen Yuheng, senior investment adviser at Jufeng Investment Consulting, told a reporter from Securities Daily that due to the suspension of trading of Guotai Junan and Haitong Securities, fund managers are unable to value these stocks based on real-time market prices.
In order to reflect the asset status in a timely and accurate manner, recently, more than 20 fund managers including Harvest Fund, Penghua Fund, Boshi Fund, and Tianhong Fund have taken actions to adjust the stock valuations of Guotai Junan and Haitong Securities held by their funds.
Statistics on the recent adjustments to the valuations of Guotai Junan and Haitong Securities by public equity institutions Peng Yansong/Chart
For example, on September 26, Bank of China Fund announced that according to the "Guiding Opinions of the China Securities Regulatory Commission on the Valuation Business of Securities Investment Funds" issued by the China Securities Regulatory Commission on September 5, 2017 [2017] No. 13 and the company's valuation policy for long-term suspended stocks and procedures, after consultation with the custodian bank, the company decided to adjust the valuation of the stocks Guotai Junan (601211) and Haitong Securities (600837) held by its funds (excluding ETF funds) from September 25, 2024, and use the "index income method" for valuation.
Specifically, since September 25, in the 23 announcements related to valuation adjustments that have been issued intensively by public equity institutions, the "index income method" has basically been used for valuation. According to statistics, there were 10 announcements that simultaneously adjusted the valuation of the above two stocks and only adjusted the valuation of Guotai Junan; 2 announcements only mentioned adjusting the valuation of Haitong Securities.
In addition, in addition to adjusting the valuation of Guotai Junan held by its funds (excluding exchange-traded open-end index securities investment funds), China Life Security Fund also used the "index income method" to value Hefei Urban Construction (stock code: 002208).
Yao Xusheng said that for funds with heavy holdings of suspended stocks, reasonable adjustments to valuation methods will help better manage risks and avoid potential losses caused by sharp fluctuations in stock prices after the market resumes trading.
Fund managers have stated in announcements that after the stock resumes trading and its trading reflects the characteristics of active market transactions, valuation based on market prices will resume, and no further announcement will be made at that time.
Adjust valuation to protect investors’ rights
The industry is particularly concerned about the resumption of trading of Guotai Junan and Haitong Securities.
“The trading suspension is expected to last no more than 25 trading days.” On September 24, Guotai Junan stated that during the suspension period, the company actively promoted various works and based on the progress of this restructuring, strictly performed its information disclosure obligations in accordance with relevant laws and regulations. After relevant matters are determined, the company will promptly issue relevant announcements and apply for the resumption of trading of the company’s stocks.
Based on the 2024 interim report, the fund holds 7.60% and 11.35% of Guotai Junan Securities and Haitong Securities respectively, and the total market value of its holdings is 7.702 billion yuan and 8.623 billion yuan respectively.
During the period, the brokerage index (884780) rose sharply. Since Guotai Junan and Haitong Securities suspended trading on September 6, as of September 26, the range has increased by 16.28% this month. The overall IOPV (fund share reference net value) premium and discount rate of the securities industry theme funds has increased from 3.26% on September 6 to 16.70% on September 26.
In the context of the rise of sectors and the suspension of trading of leading stocks, fund companies adjust the valuation of suspended stocks held to better reflect the asset status and protect the rights and interests of investors.
According to Article 3 of Part 2 "Basic Principles of Valuation" of the "Guiding Opinions of the China Securities Regulatory Commission on the Valuation Business of Securities Investment Funds", if there is a major change in the economic environment or a major event that affects the security price of the securities issuer, so that the impact of potential valuation adjustments on the net asset value of the fund on the previous valuation day is more than 0.25%, the valuation should be adjusted and the fair value recognized.
Assistant Dean and Associate Professor Lou Qiuran, w88 casino of Law, w88 casinotold a reporter from Securities Daily that in most cases, valuation adjustments occur when the stock prices held by the fund may experience a (severe) decline in stock prices. At this time, if the fund manager does not adjust the valuation of individual stocks, it will suffer serious losses due to a large number of early redemptions by investors.
Lou Qiuranstated that valuation adjustments may have three impacts on investors:
First of all, for investors who already hold fund shares, valuation adjustments can increase the net value of fund shares. If they choose to redeem now, they can obtain greater returns.
Secondly, investors who already hold fund shares can of course choose to continue to hold shares, but there may be errors in the fund manager's valuation adjustments in the future that need to be corrected. At this time, investors may suffer "losses."
Finally, other investors may consider buying fund shares after the valuation has been adjusted. At this time, they may gain profits because the valuation adjustment is "not high enough", but they may also suffer losses due to future corrections. At this time, for this type of investors, risks and returns are coexisting.
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