On April 16, A-shares had a rare 100-share fall limit in the past two months, with a total of 746 stocks closing down. According to the statistics of the first financial reporter, the average market value of the stocks that fell on the day was 2.986 billion yuan, the median was 2.377 billion yuan, and only 11 stocks had a market value of more than 10 billion yuan, that is, almost all the stocks were small and micro cap stocks.
For small and micro cap stocks to continue to fall sharply, some market participants are worried that after the reform of the dividend system, funds will sell small and micro caps and flock to large-cap stocks with more stable value.
However, some institutions believe that the series of policies proposed by the new "National Nine Articles" are aimed at further improving the development level and investment value of listed companies, and what is more worthy of attention is the fundamentals of listed companies.
"In the macro data released today, real estate development, consumption and other aspects are generally expected, and there is not much negative impact on the market. What is the reason for the rapid decline of small and micro cap stocks?" A Shanghai private equity person told Yicai that the new "National Nine Articles" have landed, and the "1+N" policy system of the capital market has been formed.
Funds "fled" from small and micro cap stocks
In the first two trading days of this week, the market was extremely differentiated, with the large market blue chips continuing to hit new highs, and the small and micro markets reappearing with a 100-share fall limit. On April 16, the Shanghai Composite Index fell 1.65% to close at 3,007.07 points, while the Shenzhen Component Index and ChiNext Index fell 2.29% and 1.97%, respectively.
When more than 5,000 stocks fell in the two cities, large-capitalization stocks performed well, Agricultural Bank of China and China Shenhua closed at record highs, PetroChina rose 2.16%, and hit a new high at the same time, and heavyweight stocks such as China Mobile, CNOOC, and Bank of China all recorded gains.
On the other hand, the micro-cap stock index closed down 10.55%, down 8.88% in the previous trading day, and fell 18.5% in total in two days, giving up all the gains since February 22, and 746 stocks that fell on the 16th, and 1,200 stocks that fell by more than 10%, almost all of them were concentrated in small and micro cap stocks.
The micro-cap index has risen by more than 140% in the past three years, so why has it fallen sharply twice in a row this year?
The above-mentioned private equity sources said that on the one hand, there is a transformation of market style, whether it is consumption or new energy, so far there is no market style that can continue to rise for three consecutive years. "Style drift is the background, and the decline in micro-cap stocks in the past two days is related to the newly released policy. The new 'National Nine Articles' have stricter requirements for dividends of listed companies, fundamentally encouraging long-term investment of funds and buying stocks with more intrinsic value, so that the funds on the floor sell small tickets and buy large tickets, so we see that the 'three barrels of oil', coal and other major market capitalization stocks have continued to rise. ”
The new "National Nine Articles" contain a total of nine contents, and the high-quality development of listed companies is mainly from three aspects: listing, continuous supervision, and delisting. Among them, in terms of continuous supervision, the strengthening of the supervision of cash dividends of listed companies, for companies that have not paid dividends for many years or have a low dividend ratio, restrict the reduction of major shareholders and implement risk warnings, etc., which have attracted great attention from the market.
There are many "iron roosters" in the A-share market, that is, they do not implement cash dividends in the case of continuous profits. Typical companies such as Fiberhome Electronics (000561. SZ), which has never paid cash dividends since its listing 20 years ago, and there are about 30 similar companies. Nearly 800 companies have accumulated dividends of less than 50 million yuan since their listing, and such companies generally have small profits and unstable profitability.
"Without discussing whether the existing dividend regulation applies to all types of listed companies, the attitude given by the main funds is relatively clear, and small and micro cap stocks will be marginalized in the future. The above-mentioned private equity person told reporters, "On the market, many small and micro markets have obvious outflows, or the result of institutional repositioning, and even some public funds are withdrawing from micro cap stocks, which further triggers the sale of quantitative trading rules." Although the current stampede of micro-cap stocks is only a case of individual stocks, and there will not be a collective inertia decline before the Spring Festival, we remain cautious about the future of the sector. ”
Profitability is generally weak
Wind data shows that as of the close of trading on April 16, there are a total of 1,998 companies (micro-cap sector) with a total market value of less than or equal to 3 billion yuan in the two cities, of which the average year-on-year growth rate of operating income of companies that have released annual reports in 2023 is 6.96% and the median is 5.11%, the average year-on-year growth rate of net profit attributable to the parent is -34.71% and the median is 1.63%, and the average year-on-year growth rate of net profit attributable to the parent company after deducting non-profits is -26.61% and the median is 5.12%.
In contrast, the average year-on-year growth rate of operating income of companies with a total market value of more than 3 billion yuan in 2023 will be 8.39% and the median will be 4.37%, the average and median year-on-year growth rate of net profit attributable to the parent company will be 7%, and the average and median year-on-year growth rate of net profit attributable to the parent company after deducting non-profits will be 48.22% and 7.81% respectively.
It can be seen from the data that the gap between the two is mainly in profitability, the median growth rate of the latter's net profit attributable to the parent in 2023 is about 5.4 percentage points higher than that of micro-cap stocks, and the difference in the growth rate of net profit attributable to the parent after deducting non-profits is about 2.7 percentage points.
Zooming in on the data sample to all A-shares, about 1,800 companies have released their 2023 annual reports, with the median growth rates of operating income and net profit attributable to the parent company of 4.4% and 4.79%, which also show the weak profitability of micro-cap stocks.
"Weak profitability means that the ability to pay dividends is relatively weak, and we see that most companies that do not pay dividends all year round, in addition to not paying attention to shareholder returns, the profitability of most companies is unstable, making them unable to continue to pay dividends. Another Shanghai private equity person told reporters.
The draft issued by the Shanghai and Shenzhen Stock Exchanges mentioned that in terms of the main board, ST will be implemented for companies that meet the basic conditions for dividends, the total cumulative cash dividends in the last three fiscal years are less than 30% of the average annual net profit, and the cumulative dividend amount is less than 50 million yuan. To be clear, this rule is subject to binding prerequisites, and is only available to companies with positive earnings and undistributed profits, and both conditions will be ST if both conditions are triggered. At the same time, the dividend rules set a transition period arrangement that will be officially implemented from January 1, 2025, that is, companies that do not meet the target for the time being still have time to improve their dividend situation.
In addition, the new delisting rules do not mean that small and micro cap stocks will be liquidated, and small and micro cap stocks are not equal to "underperforming stocks". Whether it is from the aspects of listing, continuous supervision or delisting, the purpose of the new "National Nine Measures" is to remove "zombie shell" companies and "junk stocks", so that enterprises with real potential can grow and expand with the support of the capital market, and improve the overall quality of existing listed companies.
"Judging from the performance of the market, the market seems to equate small-capitalization varieties with stocks that are at risk of delisting under the new rules. The above-mentioned private equity person told reporters, "In fact, there are still some listed companies with good operating quality in the micro-cap stock sector." To a certain extent, small and micro caps represent the stage of trial and error and exploration in the growth process of enterprises, which needs to be faced by the market and investors. In addition to the size of the market capitalization, fundamentals are the core key to consider. ”
The above-mentioned private equity sources also said that the recent sharp decline in micro-cap stocks may be related to the performance of market sentiment in the short term, "with the refinement and improvement of the new regulations, small-capitalization stocks with relatively high-quality fundamentals are still expected to receive funds to face up."
(This article is from Yicai)