A-shares have really changed this time, and some people should be careful

After 10 years, the State Council has issued a new document!

The newly released "Several Opinions on Strengthening Supervision and Preventing Risks and Promoting the High-quality Development of the Capital Market" (hereinafter referred to as the "New "National Nine Articles") mainly involves the supervision of the whole chain of listed companies, the return of securities and fund institutions to their origins, and the promotion of medium and long-term capital entry into the market. The market reacted violently, and in the four trading days after the release of the new "National Nine Articles", A-shares came out of a wave of extreme divergence, with the Shanghai Composite 50 rising 3% and the CSI 300 rising 2.7%. At the same time, the CSI 2000 fell sharply by 5.15%, and the Wind micro-cap index fell by 11.18%.

This not only leads us to think about A-shares: what are the current problems in A-shares, how will the regulators act, and where should the market go in the future?

1

For A-shares, investors can be said to be full of complaints, among which the most criticized is undoubtedly the prevailing speculative atmosphere in A-shares. Speculation in small, poor, and new speculation not only turns the market into an "electric fan", but also makes investors feel extremely poor.

This is of course related to the market structure of a large number of retail investors in A-shares, but it is also a helpless choice for investors, relative to U.S. stocks, A-share listed companies can be described as "iron roosters", specifically, in the past five years, the average annual dividend ratio of A-shares is about 1.5%, which is not too low, but the repurchase amount only accounts for about 0.1% of the total market value of listed companies, far lower than 2% of U.S. stocks. If you can't make money from the company's profits, what can investors do except speculate on the stock price?

However, this speculative idea, which is akin to "gambling", harms everyone. If A-shares are regarded as a whole, the source of funds is mainly new funds, as well as the repurchase and dividends of listed companies, and the capital needs are mainly IPOs, additional issuances, commissions, stamp duty, etc. When the buybacks and dividends of listed companies are difficult to make up for the outflow of funds caused by IPOs and additional issuances, and the stock market continues to lose blood due to commissions and stamp duty, the wealth of A-shares is actually shrinking, and investors are caught in a "negative sum game". From the perspective of market efficiency, no one can continue to beat the market, which means that investors strive to pursue hot spots and dig gold stocks, not only can not obtain excess returns, but even lead to the accelerated outflow of wealth due to the increase in commissions and stamp duty, and finally, A-shares continue to defend 3000 points, and the tried and tested "broad-based index strategy" in U.S. stocks has become a joke in A-shares.

Everyone is trying to chase α, but in the end, they damage the β they should have gotten and the gains outweigh the losses.

2

To change this situation, it is not enough to rely on the evolution of A-shares themselves, but also need the cooperation of regulators.

In the new "National Nine Articles", the regulator proposes to "strictly control the entry of issuance and listing, strictly supervise listed companies, increase the supervision of delisting, strengthen the supervision of securities and fund institutions, strengthen the supervision of transactions, vigorously promote the entry of medium and long-term funds into the market, further deepen the reform and opening up in an all-round way, and promote the formation of a joint force to promote the high-quality development of the capital market." ”

In order to understand the profound meaning of the new "National Nine Articles", we must return to the current problems of A-shares, and remember that the goal of supervision must be to build a market for rational investment, value investment, and long-term investment. For the speculation that is widespread in the current market, the regulator is not very disgusted and clearly opposed, but it is certainly not supported, otherwise it will not issue a warning to companies with abnormal gains.

The key to eliminating speculation and cultivating investment is to reduce α and increase β.

From the perspective of reducing α, because the market is efficient, no one can continue to beat the market, and the so-called α is either the institution taking advantage of an unequal position, such as the institution has more abundant short-selling channels, or it is formed by insider trading and private collusion. For example, the market-based declaration of refinancing securities has been adjusted from real-time availability to next-day availability, reducing the efficiency of securities lending and lending, thereby limiting the advantages of institutions in the use of information and tools.

From the point of view of improving β, the key is to get less money out and more money in. The money that went out was mainly IPOs, additional issuances, commissions and stamp duty. In this regard, the regulatory requirements should strictly control the listing customs, put an end to junk companies mixed in to cheat money, securities fund companies need to reduce the rate, to give profits to investors, for stamp duty, non-regulatory can reach, but also require the vigorous development of ETFs, in fact, in a disguised reduction of stamp duty collection. The money coming in is mainly dividends, repurchases and new funds of listed companies, and the supervision requires listed companies to increase dividend yields and repurchase shares and cancel them in accordance with the law. At the same time, it is not only necessary to attract social security funds, pension funds, and insurance funds, but also to encourage bank wealth management and trust funds to increase the allocation of equity assets.

3

In the future, index investment will be popular, and the differentiation between large and small votes will be more obvious.

For the investment market, investing in the index has a higher winning rate. Even in the developed U.S. market, the best quantitative fund managers struggle to beat index funds, so U.S. investors don't like to dig for gold stocks as much as China, on the contrary, the U.S. market has triple long index ETFs and triple short index ETFs to help investors invest in β. It is foreseeable that with the implementation of a series of regulatory measures, A-shares will have better β, but it will become more and more difficult to tap α, and more and more funds will turn to passive investment, and the resulting reduction in transaction fees will push the index upward, further strengthening the benefits of β strategies.

The volatility of large tickets will decrease, and the volatility of small tickets will increase. For social security funds, pensions, insurance funds, which are similar to the "just cash" of the medium and long-term funds, often prefer higher dividends, more stable business prospects of the medium and large bills, and investment in the large bills can help institutions avoid moral hazard, it is expected that these medium and long-term funds will be like the beginning of the year of the stable funds, through the CSI 300 ETF and other into the market. With the continuous advancement of this process, the allocation and transaction funds in the market have gradually diverged, and the allocation funds represented by social security funds, pensions and insurance funds will be concentrated in the medium and long-term holding of large bills, and the transaction funds represented by floating funds and retail investors will be concentrated in small bills. The different preferences of the main force will make the large and small tickets more separated, showing completely different characteristics, the large tickets out of the long bull, the volatility is reduced, the allocation of funds to enjoy the value brought by long-term holding, the small tickets are stagnant for a long time, the volatility is amplified, and the trading funds enjoy the benefits brought by short-term fluctuations. A-shares are likely to evolve into U.S. stocks, with the vast majority of the index's gains contributed by a few giants, and the remaining thousands of stocks not rising or even falling.

4

After the announcement of the new "National Nine Articles", the market reaction was very extreme, either rising sharply or falling sharply, reflecting the market's shallow and fragmented understanding of the "National Nine Articles".

In fact, as a key document issued once in 10 years, the "National Nine Articles" are certainly not to solve the ups and downs of the current market, but mainly to focus on the long-term problems in the market and the future direction of construction. After we have analyzed the biggest problem in A-shares - "speculation", we can compare the "National Nine Articles" one by one with the perspective of solving the problem, and we can find that the rules that originally seemed chaotic and disorderly are actually extremely orderly, and the recruitment directly points to the problem of A-shares.

It is foreseeable that the sky of A-shares is really going to change!

[Note: The market is risky, and investment needs to be cautious.] In any case, the information or opinions expressed in this subscription account are only an exchange of views and do not constitute investment advice to any person. Unless otherwise noted, the research data in this article is supported by Straight Flush iFinD]

This article was originally written by "Xingtu Financial Research Institute", and the author is Wu Zewei, a researcher at Xingtu Financial Research Institute