Two Sessions Approaching State-Owned Enterprises, Mixed Reforms Continue To Stimulate The Market Nerves

In 2017, the national "two sessions" will be opened in early March. The reform of state-owned enterprises, especially the mixed reform, which is regarded as a breakthrough, will undoubtedly become a hot topic.

Insiders said that the central economic work conference held at the end of last year clearly stated that

Substantive steps will be made in the fields of electricity, oil, natural gas, railways, civil aviation, telecommunications, and military industry. The annual report of the SASAC annual work conference and the government work report of the "two sessions" of local provinces will also be the top priority of this year's reform of state-owned enterprises. The mixed reform of monopoly areas will be solved in succession, and the local mixed reform will accelerate. The process of listing of central enterprises will also accelerate, and the mixed reform will show six new characteristics.

During the "two sessions", state-owned enterprises mixed or changed bright spots. Good rotation will continue to stimulate the market nerves.

Before and after the Spring Festival, the two tier market in the military, aviation, telecommunications and other sectors of the mix to improve the performance of the stock market eye-catching, especially the strong momentum of the military sector, since the beginning of 2017, the defense industry sector rose 7.47%, ranking first.

Of the 38 A share defense and military sector listed companies, 25 were leading the Shanghai and Shenzhen 300 index in the same period. Among them, *ST Panthers, steel structure projects, and Northern navigation three companies all led the defense industry by more than 20%, especially the *ST Panthers rose by 29.25% at the beginning of the year.

In 2017, the central enterprises began to take the lead from the larger scale military sector.

On the one hand, the Politburo of the CPC Central Committee decided to set up the central military civilian integration development committee, and the classified reform plan and supporting policies of the military research institutes are expected to come out; on the other hand, the Central Military Enterprises' mixed reform ideas are clear.

China's nuclear construction and Chinese ships have been included in the first batch of mixed reform pilot list, the recent implementation plan or the approval plan; the weapons industry group issued a mixed reform guidance; Shao Kaiwen, deputy general manager of China Shipbuilding Heavy Industry, said in January 24th that capital management will adhere to the operation of "mixed ownership" and "military civilian integration", and further promote asset securitization.

"Before and after the" two sessions "is expected to become an important time window for accelerating the reform of military industry, so the first quarter is a better opportunity for the military industry to get excess returns.

A military industry analyst said that ship asset injection and civil military integration are the two investment directions of the current military sector.

In terms of ship assets injection, the assets securitization rate of China shipbuilding industry group and China shipbuilding industry group is 38% and 50% respectively. The sharp decline of the civil ship market has brought about strong internal impetus for reform, and the assets of the group's military industry can be injected.

In terms of military and civilian integration, we should focus on three subdivision directions, namely, information technology in military industry, new materials in military industry and Beidou.

The civil aviation sector has also enjoyed frequent new year.

Following the pilot reform of China Eastern Airlines, China Southern Airlines has also launched a mixture of aviation and state-owned enterprises.

In its annual work conference held in January 9th, China Southern Airlines Group proposed that this year we will focus on introducing advanced Internet companies, cross shareholding with global industry leaders or jointly establishing subsidiaries to promote the reform of mixed ownership.

In January 11th, China Southern Airlines announced that China Southern Airlines has been actively exploring the reform of mixed ownership.

As of the announcement date, China Southern Airlines Group did not formulate a concrete plan for mixed ownership reform, and the reform of mixed ownership was limited to the Southern Airlines Group level and did not involve listed companies.

Su Baoliang, a pportation industry analyst at state securities, said that Eastern Airlines has become the leader of the civil aviation mixed reform, and other civil aviation companies are catching up.

China Southern Airlines, Air China and Sichuan airlines will be actively promoted in 2017.

Specific measures include the introduction of international strategic investment or cross shareholding with the same international Aero Union Corp, the introduction of advanced Internet companies, and the establishment of international trunk subsidiaries jointly with leading international airlines.

It is expected that China Southern Airlines will actively cooperate with the airlines such as France and Hollywood in the Tianhe alliance, and promote the reform of mixed ownership.

Mixed reform is also actively moving forward.

Recently, the "information and communication industry development plan (2016-2020 years") focused on four major areas, including telecommunications and mixed reform, and put forward the process of actively promoting the reform of mixed ownership in the telecommunications sector.

At present, China Unicom has been included in the first batch of mixed reform pilot list.

China Unicom has entered into strategic cooperation with BAT, triggering the discussion and forecast of the operators' ideas and directions for mixed reform. China Mobile has also formally signed strategic cooperation framework agreements with Alibaba and AsiaInfo, and has set up the "moving China Klc Holdings Ltd" and "China Mobile Capital Holdings Limited". As the earliest operator in the operation, China Telecom has also made new progress. According to the announcement, the number 100 holdings of the China Telecom group will acquire the 100% stake of the group's Tianyi video, colorful interaction, Tianyi reading and AI animation four companies through issuing shares and paying cash.

This means that there are new changes in the China Telecom mix reform, and the independent operation of each subsidiary will be changed to inject its listed company into an innovative business "outpost".

Zhao Cheng, an analyst with the securities and communications industry in the Great Wall, believes that the recent business problems exposed by China Unicom's earnings report are the necessity of reform. Combined with the administrative color of the telecommunications industry and the demand for market reform, the reform of state-owned enterprises in the communications industry in 2017 is expected to be strong.

There are more than 20 state-owned enterprises in the communications sector, accounting for nearly 40% of the market share, mainly from China Putian, Wuhan postal service, China electronics industry information, China electronic technology, Datang Telecom five communications industry group.

Previously, beacon communications, light and fast technology, Gaohong share and special information have been carried out through equity incentive and capital operation. With the expected warming and the leading effect of China Unicom, it is expected that the subsequent mixed mode will become the main way of the reform of state-owned enterprises.

The tide of local mixed reform is also surging.

From the current "two sessions" provinces can be found that mixed change has become 2017.

The direction of key breakthroughs, many provinces have announced mixed change, employee stock ownership implementation details or even clear the list of pilot enterprises.

In February 6th, Guo Shuqing, governor of Shandong Province, put forward the government's work report, actively and steadily carrying out the reform of mixed ownership and the pilot scheme of employee stock ownership in provincial state-owned enterprises.

In addition, in February 3rd, the guiding opinions on the role of small and medium shareholders in the mixed ownership reform of state-owned enterprises in Shandong were put forward.

Mixed ownership enterprises should establish a positive income distribution mechanism, establish a positive and effective profit distribution mechanism and smooth flow of equity withdrawal channels. Mixed ownership enterprises should focus on improving the level of capital securitization, and encourage the adoption of mergers and acquisitions, IPO, new three board listing and other ways to raise equity liquidity through listed companies.

According to the requirements of the local "two sessions" in 2017,

Anhui and other places will speed up the overall listing of group assets; Yunnan, Xinjiang, Jilin and other places will actively promote the listing and asset securitization of municipal enterprises; Shanghai, Beijing, Guangdong, Shandong and other places have issued detailed rules for the implementation of employee stock ownership; Sichuan, Tianjin and other places will actively promote ESOP to land within the year.

Some provinces and municipalities have quantified the quantitative objectives.

In February 6th, the Tianjin provincial SASAC website published a briefing on deepening the reform of state owned enterprises. It showed that it was planned to carry out the pilot reform of the group level in 5 to 6 groups, and strive to complete two pilot projects.

Shaanxi province is clear that the first batch of pilot enterprises in the province will be controlled at around 10.

In principle, 4 or 5 enterprises are selected from the provincial SASAC or other provincial institutions to perform the duties of investors. Xi'an selects about 2 enterprises to conduct pilot projects. Other cities and Yangling demonstration zones can choose 1 enterprises to conduct pilot projects.

Zhejiang province proposes to select 5 to 10 state-owned enterprises in the whole province to carry out the pilot of ESOP.

Beijing has proposed a pilot scheme for employee stock ownership of 6 enterprises with mixed ownership.

Jilin proposed that in 2017, we should actively promote the reform of mixed ownership, choose 10 to 20 provincial and prefecture level state-owned enterprises to carry out mixed pformation pilot projects, choose 5 to 10 enterprises to carry out the pilot of employee stock ownership, and accelerate asset securitization.

We should accelerate the reform of key enterprises and continue to push forward the comprehensive reform of forest industry group, Ji Coal Group and Hao Rong Group.

Liao Ling, analyst at GF Securities, said that local mixed reform has entered an accelerated stage.

In 2017, the local "two sessions" put forward higher requirements for the reform of state-owned enterprises in various provinces and cities. The follow up reform of local state-owned enterprises is expected to deepen, and the mixed reform will be a key breakthrough in the reform of state-owned enterprises.

This year, the reform of state-owned enterprises, especially the mixed reform, is expected to achieve a comprehensive breakthrough from "point to point" and "central enterprises to local".

In terms of regional mainline, coastal provinces and provinces with greater pressure on the supply side will become the focus of local state-owned enterprises reform.

It is suggested that we should focus on areas with faster speed and more diversified reform models, such as Shanghai, Guangdong, Zhejiang, Shandong, Tianjin and Anhui. The reform mode mainly includes the overall listing and the listing of core assets, the pilot of state-owned capital investment and operation, the pilot of employee stock ownership and the concept fund of state enterprise reform.

Niu Niu Financial Research Center statistics show that as of February 7, 2017, of the 208 listed companies suspended from the two cities, 20 enterprises were actually controlled by the SASAC of the State Council, and 28 enterprises were actually controlled by local SASAC.

State owned listed companies account for nearly 1/4 of the total number of suspension companies.

Judging from the overall situation, the reform of state-owned enterprises presents a "local pilot".

If the tide surges, the central enterprises will be ready to take the military industry as the pioneer.

It is estimated that the scope of mixed reform will be further expanded in 2017, and the plan will be implemented.

Li Jin, executive director of the China Enterprise Research Institute, said in an interview that the current mixed ownership reform will present six new characteristics: first, the reform of state-owned enterprises has entered the 2 stage of taking mixed changes as the breakthrough point, presenting three trends: the central enterprises are going to break through the reform of the company system and the listing, and the enterprises in the field of monopoly that the NDRC focuses on will enter the pilot stage. The local state-owned enterprises will enter the deepening stage of the reform of the mixed ownership system, including the implementation stage of external capital entry and internal employee stock ownership.

Second, a large number of state-owned enterprises in central enterprises are securitisation of assets.

In 2017, the overall listing of central enterprises or obviously increased speed, the probability of securitisation of state assets will be dominated by stock companies.

Third, the mixed ownership of local state-owned enterprises has entered the deepening stage of ownership.

It can be expected that enterprises that will be fully competitive in the future will continue to step up the pace of mixed reform.

Fourthly, with industrial upgrading and pformation, private enterprises are linked to the Internet gene and are not willing to accept the state-owned enterprises.

Fifthly, management incentives will not be fast and will not spawn more entrepreneurs. The first batch of Chinese professional managers will emerge.

Six, successful mixed ownership reform cases were not tested by the pilot, and the experience of reform was generally outside the pilot.

Last year, the SASAC concluded that the twelve sample is basically not a pilot unit.

Li Jin pointed out that mixed reform is a breakthrough, and the word "stable" is still the prerequisite for the reform of state-owned enterprises.

From the annual meeting of the SASAC, the breakthrough of mixed reform is at the level of listing of group companies, rather than on the level of direct mixing with private capital.

The Great Wall Securities believes that the mix of reforms recently put on the agenda is more likely to stimulate market nerves and trigger a new round of reform of state-owned enterprises.

In 2017, the reform of state-owned enterprises focused on mixed application.

From the following two aspects, we can grasp the thematic investment opportunities of SOE reform: first, it is expected to enter the "second batch" of mixed reform pilot.

According to the central economic work conference, the mixed reform will take "substantive steps" in the fields of electricity, oil, natural gas, railways, civil aviation, telecommunications, and military industry. We can excavate the monopolized central enterprises that are expected to enter the second batch of pilot projects according to the seven categories.

Second, the reform of state-owned enterprises is quicker in the areas where Shanghai and Shenzhen are reforming. The reform process of SOEs is fast, the market atmosphere is strong, and the resistance of SOEs is relatively small.

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