The current market is characterized by a sustained downturn, where daily trading volumes hover around 500 billion yuan. Despite the minor daily fluctuations in market indices, individual stocks face a different reality, with a vast majority experiencing declines rather than gains. On days marked by market drops, it is not uncommon for over three thousand, and even up to four thousand stocks, to witness reductions in their prices. This continuous slide has led to a normalized state of decline, where daily price drops have become almost habitual, with many stocks repeatedly setting new lows.

Consequently, investors are becoming desensitized to these declines, mirroring the performance of their portfolios, which likewise reach new lows day after day. The optimism that prevailed at the beginning of the year—when the Shanghai Composite Index dipped to 2635 points—is now a distant memory. Initially, there was a hopeful sentiment towards interventions by the management authorities to stabilize the market, with calls for governmental action echoing throughout trading floors. Yet, in the present climate, even with indices remaining above 2800 points, disillusionment has taken root among investors, as many abandon their hopes for a turnaround.

Nevertheless, there are two notable aspects that stand out in this otherwise bleak market environment. Firstly, funding sectors represented by entities like the Central Huijin Investment Ltd. continue to operate diligently to uphold the benchmarks of major stock indices. This commitment has resulted in a positive influence on heavyweight stocks, particularly the five major state-owned banks. Investors who have maintained long-term holdings in these banks have not only weathered the storm of declining indices but have also managed to achieve significant returns contrary to the overall market's bearish tendencies.

Secondly, as listed companies begin to report their semi-annual financial results for 2024, a wave of cash dividends is emerging. While cash dividends typically serve as mere embellishments in interim financial reports, this year, spurred by management advocacy, such dividends have erupted into a prominent feature. By August 25, 373 A-share companies had announced plans to distribute interim cash dividends, totaling over 160 billion yuan. Not only does this mark a record in the number of firms proposing dividends, but several companies have shown astounding generosity, with some suggesting dividend distributions as high as 80%. Thus, amidst the prevailing gloom across the market, these dividend announcements have evolved into the only tangible achievement that management can proudly showcase.

Despite the frenzy over cash dividends, the overall A-share market remains lethargic, except for the continued rise of heavyweight stocks like the five major banks. Intriguingly, as these bank shares continually set new highs, the broader market index tends to decline concurrently, further accentuating the rough path for smaller stocks. This phenomenon appears reminiscent of a seesaw effect, where the performance of leading stocks sharply contrasts with the broader market trends.

Understanding this seesaw effect isn't overly complex. Presently, the market suffers from a shortage of liquidity, with daily transactions lingering at around 500 billion yuan. As capital flows predominantly toward weighty stocks like the major banks, funds available for other stocks diminish significantly, leaving many stocks without the backing they require, thus paving the way for inevitable price drops.

Given the prevailing enthusiasm around cash dividends from listed companies, it raises an important question: why remains the A-share market so subdued? The answer lies in recognizing that cash dividends are not a panacea for the ailing stock market. Despite heightened attention from management towards promoting cash dividends, and calls for multiple distributions from Chairman Wu Qing, one must acknowledge that the influence of cash dividends on market dynamics remains limited. The malaise affecting stock prices stems from numerous complex factors; merely emphasizing cash dividends cannot shift the tide of this bearish sentiment. Restoring confidence in the market will require addressing these fundamental issues comprehensively, rather than relying on the singular fix of enhancing cash dividend policies.

While cash dividends can inject a measure of new capital into the market, the actual volume of effective liquidity is relatively modest. For instance, of the announced 160 billion yuan in interim dividends earmarked by the 373 A-share companies up to August 25, no more than one-third is expected to flow back into the A-share market. The primary beneficiaries of such dividends are often the major shareholders within these companies. Hence, the capitalization that could potentially benefit the broader market remains constrained, consequently limiting its uplifting effect on market trajectories.

Moreover, in the current framework of market mechanisms and tax policies surrounding dividends, the potential for meaningful returns to investors is compromised, further dampening investor confidence. On one hand, the market mandates that dividend distributions undergo ex-dividend adjustments, thereby preventing investors from reaping the full fruit of their investments. On the other hand, for retail investors, the tax liabilities associated with cash dividends compound the issue; as dividends increase, so too does the tax burden, which ultimately diminishes the net benefit for investors. Consequently, the enthusiasm for dividend payouts fails to materialize as a confidence booster within the investment community. It’s essential for management to take steps towards abolishing dividend taxes swiftly since allowing such taxes only serves to disincentivize investors further.