Sentence | Kazuo Tsuki
On the first trading day of February, there was another landscape of 4000+ waiting to rise and 100 shares falling to the limit, and people may have seen it no wonder.
Although 2024 has just passed a month and a day, for hundreds of millions of investors, the pain they have endured in just over 30 days is likely to be more than what they have experienced in the past few months or even years, just because the market has a miserable word.
As far as the three major A-share indices are concerned, the Shanghai Composite Index fell by 6.27% in January this year, which is more than the decline of last year (-3.7%), the Shenzhen Component Index fell by 13.77%, which is also more than the decline of last year (-13.54%), and the ChiNext Index fell by 16.81%, close to the decline of last year (-19.41%). For the first time, the Shanghai Composite Index was also in the red for the first time in six consecutive months, something that had not been seen in the Great Bear Market of 2008, 2015 and 2018.
If you look at the average stock price of all A, the average stock price of A-shares fell by 21.24% in January this year, which means that as long as investors hold individual stocks, they will lose 21.24% on average, and the average stock price of all A-shares last year fell by only 6.12%. This is second only to the 27.44% during the 2016 circuit breaker, and the most panicked three months of the 2015 stock market crash were -16.3%, -15.15% and -16.24% respectively - in other words, the market in January this year has surpassed the 2015 stock market crash.
According to incomplete statistics, the national team has spent 100 billion yuan to sweep the SSE 50 ETF, CSI 300 ETF and the "Zhongzitou" variety to protect the disk, which has slowed down the decline of A-shares to a certain extent. Without these moves, the market is likely to be even more miserable.
Why did A-shares fall to such a point that even the national team couldn't hold up the bottom?
From the perspective of the market, most of the recent market performance is dominated by the weighted sector, and some people say that it is "perfectly avoiding the direction of foreign capital heavy positions to run away, and also perfectly avoiding the direction of public offering heavy positions". Objectively speaking, this strategy can indeed help the market to slow down the downward trend, but from the actual effect is not ideal: on the one hand, due to the large market value of the weighted sector, in the context of large-scale new funds have not yet entered the market, the choice to buy the weighted sector will inevitably cause a blood-pumping effect on other small and medium-sized caps, and then cause the continued decline of small and medium-cap stocks, as well as the market's decline and rise , on the contrary, it is still losing further, and over time it falls below the liquidation line and passively sells, which once again increases the selling pressure on the market.
To sum up: although the "face" of the index has been temporarily protected, the money-making effect of the market has not returned, such as the GEM index has continuously hit new lows. Once the heavyweight stocks make up for the decline, the market will inevitably be bleak again.
Of course, there are many deep-seated reasons behind the continuous plunge of A-shares, and we might as well discuss them one by one.
First of all, is it because the policy is not effective? Obviously not.
Since the meeting of the Political Bureau of the Central Committee on July 24 last year proposed to "activate the capital market and boost investor confidence", the favorable policies have not been interrupted, especially the epic "four arrows" on August 27, which shows the management's clear support for the capital market. Then, almost whatever the market wants, the management will give: from stamp duty to slowing down IPOs, from new regulations on reducing holdings to regulatory quantification, from the recent resumption of the central bank's sky-high PSL to the unexpected RRR cut, from the restriction of securities lending and short-selling by securities brokerages under regulatory guidance to the CSRC's announcement that it wants to build an "investor-oriented" capital market...... It can be said that the intensity of policy care is unprecedented, and it can be seen from this point alone that the management does hope that A-shares can get better.
Second, is it because the economic fundamentals have not been repaired? It doesn't seem to be exactly.
At the domestic level, looking back at the road to economic recovery in 2023, although it has not been smooth sailing, the annual growth rate of 5.2% is still satisfactory. The PMI data just released a few days ago show that the manufacturing PMI and non-manufacturing PMI have rebounded from the previous month, and the production index, new orders index, and new export orders index have also shown an improvement trend, indicating that domestic and foreign demand have eased, and the overall prosperity of various industries has been further improved. Although the most worrying real estate risks have not yet been completely resolved, the continuous efforts on the policy side are obvious to all, and the industry should be marginally better in the future.
At the overseas level, although Fed Chairman Jerome Powell made it clear that "it is unlikely that interest rates will be cut in March", which almost disappointed market expectations, it is undeniable that the Fed's interest rate hike cycle has basically ended, and the continuous rise of the external stock market has reflected this fact, while during this period, A-shares have not risen but fallen, further indicating that external factors are not the main reason for the endless decline of A-shares.
Again, is the market short of money? Yes, not exactly.
From a practical point of view, as the Spring Festival holiday approaches, various accounts payable on the real economy side are facing payment pressure, and residents also need a certain amount of cash flow to meet the needs of holiday consumption, so it is not excluded that some investors may sell assets at a low price in exchange for liquidity. However, from the perspective of total money supply, the current volume of M2 is close to 300 trillion yuan, and the overall scale of social financing is relatively stable, which means that there is no shortage of liquidity at the whole social level.
This "divergence" reflects the lack of monetary mobilization capacity, and the fundamental reason lies in the lack of confidence in the market: the balance sheet of the household sector has not been well improved, people's willingness to invest and consume is not strong, and the risk appetite has declined, which in turn has led to the weakening of the long power of the capital market; Buy gold or treasury bonds, and are reluctant to invest in the stock market or allocate funds, thus forming a vicious circle.
In addition, the lack of confidence in capital markets is also linked to a number of problems. For example, whether the economic fundamentals can continue to improve substantially, whether the market's expectations for real estate and local bonds can be reversed, whether uncertainty and risk factors such as the great power game can be weakened, whether the situation of "heavy financing and light investment" in A-shares will really change, whether the market blood pumping caused by crazy IPOs and other institutional drawbacks can be cured, and whether the protection of the interests of small and medium-sized investors can be realized, and so on.
These need to be tested over time, and it is difficult to get a clear answer for the time being, but it is precisely because of the lack of answers for the time being that the panic stampede decline in the market has been further exacerbated.
So, when will the market really bottom?
Historical experience tells us that every time the bottom of A-shares is not bought by the national team, and the bottom is not rescued, only after the gradual restoration of market confidence, the gradual accumulation of consensus of all parties, and the gradual consistency of expectations of all parties, can the market truly see the bottom. In other words, if the position of the national team's big buying is regarded as the bottom of the policy, then it is likely that there will be a market bottom later.
The most typical example is 2018. Affected by factors such as Sino-US trade frictions, the A-share market has been in a downturn for almost a whole year, and it is definitely an out-and-out bear market. Around mid-October of that year, the bottom of the A-share policy began to emerge.
On October 7, the People's Bank of China (PBOC) decided to lower the RMB reserve requirement ratio of some financial institutions by 1 percentage point from October 15; on October 19, Vice Premier Liu He and the heads of the People's Bank of China (PBOC, CBIRC, and CSRC) spoke on the same day, expressing their stance on the capital market from different angles, increasing support to boost confidence, and releasing a signal of comprehensive market protection; on October 31, the Political Bureau of the CPC Central Committee held a meeting and proposed " Focusing on the reform of the capital market, strengthen the construction of the system, stimulate the vitality of the market, and promote the long-term and healthy development of the capital market"; at the forum on private enterprises held on November 1, it was emphasized that it is necessary to unswervingly encourage, support, and guide the development of non-public economy, and support the development of private enterprises and move towards a broader stage. In addition, since the end of October, brokers, insurance funds, and local governments have joined forces to raise bailout funds, participate in resolving the liquidity risk of stock pledges of high-quality listed companies, and actively serve the real economy.
A series of measures are reflected in the market, that is, the Shanghai Composite Index began to rebound from 2449 points on October 19, reaching a maximum of 2703 points, but from late November it continued to fluctuate downward, falling to 2462 points near the end of the year, when the market was filled with extremely depressed and even pessimistic emotions. Unexpectedly, just after the New Year's Day holiday in 2019, A-shares seemed to wake up suddenly, opening a wave of almost unilateral rise, and lasted for more than a quarter, by April 8, 2019, the Shanghai Composite Index reached a maximum of 3288 points, a rebound of more than 800 points, which is amazing, and the bottom of the market after the policy bottom is also confirmed on the occasion of the New Year's Eve, where is the real bottom.
According to this logic, the 2724 points of the market on January 23 can not be confirmed as the bottom of the market, if the aforementioned series of problems affecting investor confidence, in the short term can not see signs of marginal improvement, or there is no new unexpected blockbuster positive, then the market does not rule out the possibility of bottoming out again or even falling below 2724 points. If we have to give an expectation, maybe several blockbuster meetings after the Spring Festival can reach a new consensus and affect the subsequent trend of the market, we might as well wait and see.
In all fairness, the recent A-shares have really hurt most people, and the market sentiment is ice after ice, including a large number of investors who have delisted, but often the more this is the case, the closer the market is to the real bottom. From the perspective of historical experience, before the arrival of the big bottom of each historical level, most people feel that the market outlook is hopeless, and they are almost dead heart for the market, but with the gradual digestion of short-term bearishness, the continuous care of the policy side and the strong entry of large funds, the market has realized the change from stabilization to reversal and even continuous rise. This is also in line with John Templeton's famous saying: "The market is always born in despair, grows in doubt, matures in longing, and destroys in hope." ”
Therefore, at this stage, for everyone, it is nothing more than two choices: either maintain patience and determination to hold the stock and wait for the rise, and do not hand over the bloody chips in your hand before dawn, or wait for the right signal to appear before entering the market, after all, when the large-level market is really coming, even if it is two or three days late to get on the bus, it will not hurt.
After all, only those who survive a bear market are qualified to be in a bull market.