A-shares skyrocketed but there was one concern

The market has skyrocketed, but now there is a concern: as soon as the bears are hit, the market will rise, will it form dependence in the future?

Will as long as the market is weak, it will pull out the bears and spur it, thus neglecting to improve the system?

On November 6, Asian markets rose sharply across the board, among which South Korea's KOSPI stock index soared 5.66%, Nikkei 225 index rose 2.37%, and Hong Kong's Hang Seng Index rose 1.71%;

The Shanghai Composite Index surged 0.91%, the Shenzhen Component Index rose 2.21%, and the ChiNext rose 3.26%.

It is worth mentioning in detail that A-shares and the Korean stock market, they have several common reasons for rising:

1. International macro: The Fed's interest rate hike expectations have been greatly reduced, and the most difficult moment is about to pass.

First, the Fed's November FOMC meeting announced a pause in interest rate hikes, and market risk appetite improved.

The Fed believes that the U.S. economy is performing strongly, inflation is improving further, and it is not in a hurry to resume raising interest rates under the trade-off.

The recent rise in Treasury interest rates and tighter financial conditions have also given the Fed more time to wait and see.

Second, the U.S. non-farm payrolls data for October was only 150,000, significantly lower than the expectation of 180,000, lowering expectations for the Fed to raise interest rates again.

2. Domestic means: Both countries "attack" short sellers.

The South Korean Financial Commission said on the 5th that it decided to completely ban short selling of stocks in the domestic stock market from tomorrow (6th) to the end of June next year, so that the regulator can improve the rules and systems.

Whether short selling will resume after the first half of next year will be decided based on the overall situation at that time, such as market trends and the implementation of system improvement measures.

South Korea will seek "fundamental improvements" in the coming months to level the playing field for retail investors, including ways to narrow the differing short-selling requirements and conditions between institutional and individual investors.

Similarly, similar news has been made in the A-share market.

For example, the WeChat public account of the Ministry of State Security issued a document that some ill-intentioned people tried in vain to stir up trouble, and were vigilant against "bears", "short-sellers", "short-sellers" and "hollow-outs".

Let's be clear: while the market needs scapegoats, and short sellers are the best scapegoats, killing scapegoats is only a stopgap measure.

Why are they just scapegoats? Because they're so small.

According to the report, short selling accounts for only a tiny fraction of South Korea's $1.7 trillion stock market, accounting for 0.6% of the market capitalization of the Kospi index and 1.6% of the market capitalization of the Kosdaq index, according to exchange data.

In the A-share market, the balance of securities borrowing and lending (short selling) only accounts for about 5.5% of the balance of A-shares.

The reason why everyone sells unanimously must be that there are other factors that cause everyone to make a common choice, and it is impossible to form a consensus expectation from the market level alone.

Of course, taking a scapegoat will indeed affect market sentiment, temporarily scare off bears and pull up the market.

Note that the way of influence is, policy - market sentiment - market movement.

It's just an emotional influence, it's just a matter of equity.

Because bears are important participants in the market, they help to discover market prices and improve the efficiency of resource allocation.

The concern now is that as soon as the policy hits the bears, the market will rebound, giving the regulators the illusion that everything is the ghost of the short sellers, so the work of improving the system is suspended.

Later, as soon as the market falls, the knee-jerk reaction is to hit the short sellers.

For A-shares, the root cause is to improve the system, the rules are fair, and morality and threats cannot be used to fill the loopholes in the rules.

It's like throwing a pile of gold on the side of the road and saying to the crowd that comes and goes, you have to be moral, don't pick up the gold on the side of the road, or I'll beat you to death.

That's too much to ask.

3. The trend of capital outflow and exchange rate depreciation pressure has reversed.

U.S. Treasury rates turned downward, the dollar began to weaken, and the depreciation pressure on the yuan and South Korean won eased.

For A-shares, a big problem that has been facing recently is capital outflow and exchange rate depreciation.

Capital outflows are due to the economic dislocation between China and the United States, as well as other accidental factors, and of course, the most direct is market factors.

That is, the interest rate differential between China and the United States is large, the US dollar appreciates, and the RMB exchange rate depreciates.

What do investors think?

The interest rate is only 1.0% when the RMB is deposited in China, but I exchange the RMB for US dollars and deposit it in Hong Kong with an interest rate of 5%, and I can also enjoy the benefits of US dollar appreciation, so why not?

Now there has been some change in expectations, and the Fed is nearing the end of its rate hike cycle, and the 10-year Treasury rate is starting to turn downward, falling from 5% to around 4.5%.

The U.S. dollar index fell from 107 to 105, betting that the dollar's decline could be the next "crowded trade".

The U.S. dollar index fell, the market expected the U.S. dollar index to fall, and the depreciation pressure on the yuan and South Korean won also eased significantly.

The offshore renminbi appreciated from 7.35 to below 7.3, at the lower end of the recent "7.3-7.34" range.

Although the interest rate differential between China and the United States is still large, after this expectation, you may think:

Although you can get a higher interest rate by exchanging the renminbi for the U.S. dollar, if the U.S. dollar depreciates and the renminbi exchange rate appreciates, maybe the interest rate difference income will not be enough to make up for the loss of the exchange rate difference.

As a result, market expectations are self-fulfilling.

What is now certain is that the dollar index has returned to a downward cycle, and the pressure on the depreciation of the RMB exchange rate has been temporarily eased.

Until a new shock arrives, the big problem of exchange rate depreciation is temporarily solved.

Of course, there is another major problem in the A-share market that has been temporarily resolved, and that is the problem of local bonds.

4. Debt reduction and fiscal stimulus have been temporarily solved, and attention should be paid to the "temporary", the biggest problem of the short-term economy.

Why has market confidence not been able to rise before, there are two main economic fundamental issues:

First of all, everyone has seen the gray rhinoceros of local debt rushing wildly, but they are helpless.

Second, they all talk about stimulating economic growth, fiscal stimulus, and infrastructure, but there is no money on the account.

Now these two major problems have been solved; on the one hand, a package of debt packages has been introduced, and on the other hand, the central government has borrowed 1 trillion yuan of special treasury bonds to build infrastructure.

New debts are exchanged for old debts, and local debts are delayed again; With a special government bond of 1 trillion yuan, economic growth will be guaranteed this year and even in the first quarter of next year.

At present, 10 trillion yuan of government bonds are issued every year, of which 5-6 trillion yuan will replace the previous national bonds, and the remaining 4-5 trillion yuan will be used for fiscal stimulus to stimulate economic growth.

The only problem with these two policies is that the total size of debt has soared again.

However, there is wine today and drunkenness today. Many people believe that the debt crisis is like Schrödinger's cat, as long as it does not erupt, it cannot be said to exist.

To sum up:

1. A-share and other markets have skyrocketed, and the international macro background is that the Fed's interest rate hike expectations have cooled down, and the tightening cycle has come to an end.

2. A-shares and South Korean stock markets have soared, and they have one thing in common, they both "attacked" short sellers.

However, it is important to note that the short sellers are only scapegoats, and the policy also mainly affects market sentiment.

Whether the market will be bullish in the future depends on whether the economic fundamentals improve, whether the rules are completely perfect, and whether the system is fair.

3. The depreciation of the US dollar is about to start a downward trend, and the pressure of RMB depreciation, which has been difficult recently, has been eased.

4. The package of debt and trillions of special treasury bonds, for the time being, pay attention to temporarily stop the gray rhinoceros of debt that is rushing in, and at the same time provide a guarantee for economic growth in the first quarter of next year.

Although these two policies have caused the scale of debt to soar, the choice of the market is to drink today and get drunk tomorrow.

From the transaction level, it should also be to grasp the expectations of most people, if they are drunk today, then you should also do the same, pay attention to the distance between the transaction and the economy.