More than 700 A-share stocks fell to the limit, and the Shanghai Composite Index retreated to 3,000 points!

Reporter: Yang Jian Editor: Peng Shuiping

In the context of the blockbuster release of the "New National Nine", the three major A-share indexes closed up on Monday, but the large and small caps were sharply divided, and the micro-cap stock index fell 8.77%. On Tuesday, the broader market opened lower and then went all the way down, and micro-cap stocks were hit hard, with the micro-cap index closing down 10.46%. More than 700 A-share stocks fell to the limit, and the Shanghai Composite Index retreated to 3,000 points.

Recently, the China Securities Regulatory Commission issued the "Opinions on the Strict Implementation of the Delisting System". For the continued decline of micro-cap stocks, the market interprets it as related to the policy of "increasing delisting supervision". In this regard, today's regulator responded to the media that the principle of delisting supervision is "to retreat as much as possible", and there is no and should not preset the number. The new rules are aimed at companies that have the ability to pay dividends but continue to have a low dividend ratio. As long as the dividend ratio or amount of "small-cap" companies meets the standard, and one of the two is met, it will not be ST. If a "small-cap stock" loses money due to poor operating performance, it will not be ST because it is "no red to divide". There is an interpretation in the market that it will be delisted if it does not pay dividends, which is a misreading.

At the same time, micro-cap stocks have suffered heavy losses in a row, which has also triggered a reflection on quantitative private equity!

The micro-cap index fell more than 19% in two days, and the Shanghai Composite Index retreated to 3,000 points

On Monday, the large-cap index rose collectively under the catalyst of the new "National Nine Measures", but at the same time, small-cap stocks generally fell, with the CSI 2000 falling 4.07% and micro-cap stocks falling by 8.77%.

Coming Tuesday, micro-cap stocks continued to take a heavy beat, with the micro-cap index closing down 10.46%. The three major A-share indexes also collectively adjusted, with the Shanghai Composite Index closing down 1.65% and retreating to 3,000 points, and the industry sector rarely fell across the board. There were more than 700 stocks falling and less than 300 stocks rising in the two markets. Many investors have posted "losses" in the investment group, and some investors said in the circle of friends that "all the money earned in March has turned into water in the past two days, and the old capital has lost a lot".

Industry insiders said that the continued sharp decline in micro-cap stocks may be related to the policy of increasing the supervision of delisting. Recently, the China Securities Regulatory Commission issued the "Opinions on the Strict Implementation of the Delisting System" supporting system rules, investors are worried about whether their tickets will be ST, so the way to avoid risk is to sell.

In response to investors' concerns, today's regulator responded to the media that the principle of delisting supervision is "to withdraw as much as possible", and there is no and should not preset the quantity. The new rules are aimed at companies that have the ability to pay dividends but continue to have a low dividend ratio. As long as the dividend ratio or amount of "small-cap" companies meets the standard, and one of the two is met, it will not be ST. If a "small-cap stock" loses money due to poor operating performance, it will not be ST because it is "no red to divide". There is an interpretation in the market that it will be delisted if it does not pay dividends, which is a misreading.

In the context of the continuous adjustment of micro-cap stocks, the performance of quantitative private equity has once again attracted the attention of the market.

In fact, after a wave of net value drawdown at the beginning of the year, the net value of many quantitative private placements has been significantly repaired recently. As of the end of March, the average excess of 4,501 quantitative products with a track record in March was 2.35%, and the average return was 2.36%. 

What I didn't expect was that just climbed up and there was another dull stick: the collapse of micro-cap stocks in the past two days, and the scene of quantitative retracement in the week before the Spring Festival reappeared. A 10 billion quantitative private equity person in Beijing told reporters. After delisting, dividends, and ST, small-capitalization companies will bear the brunt of the "three-board axe", and the strategies of small-cap and micro-cap stocks, whether subjective or quantitative, will be affected to varying degrees.

The investment style of the market may change significantly

The recent market volatility is indeed eye-catching, and Chen Xingwen, chief investment officer of Kurosaki Capital, told reporters that the introduction of the new "National Nine Articles" policy is essentially to promote the healthy development of the capital market, but the market reaction in the short term has shown the opposite trend of expectations, mainly because of the differences in market participants' interpretation of the policy and the management of expectations. In the short term, the market may overreact and trade emotionally, but with the market's in-depth understanding and digestion of policies, rational investment logic will gradually return. 

The new "National Nine Measures" policy marks the strategic transformation of China's stock market, from a financing market to an investment market. This change indicates a major change in investment style, the past investment model based on themes and restructuring speculation will gradually fade out, the short-term operation of capital will be inhibited, and market resources will flow more to those enterprises that are willing to pay dividends. The policy will accelerate the elimination of junk stocks, although the market may experience adjustment pains in the short term, as it is bound to completely change the existing "cake-sharing" model. 

Hao Xinming, manager of Fangxin Wealth Investment Fund, told reporters that the market is currently in a volatile and downward cycle, and the time and space for adjustment have not reached the inflection point conditions, especially the small and medium-cap stocks have fallen hugely, because the ecosystem of small-capitalization enterprises will undergo major changes, and the quantitative game system built on the original basis needs to reach the equilibrium point again. The decline of a large number of small-capitalization companies in the A-share market has hit the already weak market confidence, and the policy is conducive to the long-term and steady development of the A-share market.

The continuous setback of micro-cap stocks has triggered a reflection on quantitative private equity

If some quantitative managers are lost in the small micro-disk like before the Spring Festival, then the blood that has just come back will have to be lost again. A leading quantitative private equity person in Shanghai said that most quantitative managers with a scale of 10 billion yuan are currently very low in micro-cap stocks. Taking the 1000 index increase as an example, many products have adjusted their positions in the micro-market to the CSI 2000, and the position ratio is roughly between 20% and 40%. In our view, there are investment opportunities for price deviations in both large and small market capitalization targets. Mainstream quantitative stock selection products will exclude some illiquid stocks in the stock selection pool, and their excess returns do not rely on micro-cap stocks. 

A 10 billion private equity person told reporters that the short-term sharp fluctuations in the market have more irrational emotional factors and complex trading behaviors. However, the failure of micro-cap stocks does not mean that all small-capitalization stocks are not good, do not fall into a misunderstanding, the company's low market capitalization does not mean that the fundamentals are poor, and there are many high-quality potential companies in small-cap stocks.

The past two days are similar to the micro-market plunge before the Spring Festival, which is very unfriendly to managers with small market capitalization and micro-cap stocks. Monday's "28 market" makes the weighted stocks drive the index up, most of the non-weighted stocks fall, this market environment is a test for the quantitative strategy of the whole market stock selection, in extreme cases will bring excess general drawdown, for managers with different stock selection styles, the difference in strategy will be revealed, a 10 billion to quantitative private equity people told reporters.

Some industry insiders also told reporters that in 2023, micro-cap stocks will be very strong, and some quantitative managers do have micro-cap stocks in their stock products, and rely on micro-cap stock style exposure to obtain income. The quantitative strategy of micro-cap stocks itself is diversified, and the number of positions can reach thousands, and it is inevitable to hold a lot of small and medium-sized tickets and a small number of micro-cap stocks. Micro-cap stocks are heavily influenced by the economic environment and market sentiment, and investors may quickly withdraw from micro-cap stocks when there is a sharp rotation of small and small-cap styles, which can trigger potential liquidity risks and collective stampede risks.

Liu Youhua, deputy director of the wealth research department of Paipai.com, told reporters that after the micro-cap stocks plummeted again, the next quantitative fund may face strategy optimization, the first is to increase the weight of fundamental factors, such as dividend ability, profitability and growth and other fundamental factors;

In addition, Big Rock Capital told reporters that referring to the development path of mature markets, regulatory policies encourage the extension of the observation dimension of market transactions, which will be conducive to strategies that are biased towards fundamentals, and quantitative strategy frequency reduction will become a general trend.

National Business Daily