Recently, Yi Xianrong, a former researcher at the Institute of Finance of the Chinese Academy of Social Sciences, published an article entitled "The Internationalization of China's Stock Market Will Comprehensively Enhance Market Confidence", the following is the full text of the article:
The internationalization of China's stock market will enhance market confidence
This is an article written before the section, estimating that the trend has not changed.
For this year's Chinese stock market, it basically made many stock market investors feel disappointed. As of September 28 ( the Shanghai Composite Index closed at 2821 points on the same day ), the Shanghai Composite Index fell by 14.7% this year, and the Shenzhen Component Index fell by 21.6%, making it the worst performing market in the world. According to incomplete statistics, if such a decline is taken, it is estimated that the per capita loss of investors in the stock market this year is about 60,000 yuan.
According to wind database statistics, in the first half of this year, 2930 stocks fell in the first half of the year, accounting for more than 83%; of which stocks fell by more than 10% accounted for more than 70%, and 117 stocks had a "waist cut". Only 19 stocks flattened in the first half of the year; only 581 stocks rose. Although the situation improved in July-August, with the Shanghai Composite Index rising about 3%, investor confidence in the market is still insufficient.
China's stock market is bleak, there are problems in the international environment, such as the Federal Reserve's interest rate hikes, monetary policy tightening, so that emerging market liquidity gradually flowed to the United States. Coupled with the continuation of Sino-US trade frictions, it has increased a series of uncertainties in China's stock market. However, the bigger problem is that China's stock market is still a fairly immature, low degree of marketization, the market has 146 million retail investors, the herd mentality is very serious, chasing up and killing the fall; the market violations of laws and regulations, fraud, manipulation of behind-the-scenes transactions occur from time to time; more seriously, many large financial institutions, listed companies' major shareholders, hot money, state capital, etc. are in the market to carry out capital games, relatively few funds of retail investors into the market, the possibility of making money is smaller. The stock market has no money-making effect, and stock market investors certainly don't have much confidence in the stock market. Therefore, in order to develop China's stock market and revitalize the confidence of China's stock market, we must not only carry out more reforms, but also need greater external factors to impact.
FTSE Russell, the world's second-largest index company, announced on September 28 that it has included three rounds of A shares in its global stock index system from June 2019, classifying them as "sub-emerging markets", marking another big step forward in the internationalization of A shares. According to the schedule, FTSE Russell will include A in its FTSE Global Equity Index Series in three phases (June 2019, September 2019, March 2020) from June 2019, with the inclusion of 20%, 40% and 40% of the three phases respectively, the first of which is included in the 25% investable market capitalization of individual stocks. After the completion of the first round of inclusion, the weighting of A-shares in FTSE Russell's global and emerging markets indexes is expected to reach 0.57% and 5.5%, respectively. According to the FTSE Russell official website, the current global fund size of tracking FTSE Russell is about 8 trillion US dollars, of which the fund size of tracking ftse Russell Emerging Market Index is 510 billion US dollars, the size of tracking global index is 347 billion US dollars, and the A-share inclusion in these two indexes is 5.5% and 0.57% respectively, so the corresponding incremental fund size can reach 30 billion US dollars.
At a time when the market expects FTSE Russell to announce the inclusion of A-shares, MSCI also plans to increase the weighting of A-shares in its major indexes, proposing to raise the A-share inclusion factor from the current 5% to 20% in two phases next year, and to join Shenzhen ChiNext stocks and mid-cap market capitalization A-shares. By May 2020, the weight of A-shares in the MSCI Emerging Markets Index is expected to increase to 3.36%, 3.7 times higher than the current level, and the number of stock markets included will increase from 235 to 434; in contrast, the weight of other Chinese stock markets, including Hong Kong stocks, will be reduced from 30.6% to 28.8%. Based on the size of the funds that track the MSCI Index, it is estimated that the increase in weighting will lead to at least $66 billion in A-share buying.
That is to say, no matter how insufficient the confidence of investors in the domestic stock market in the Chinese market is, or how uncertain the environment in the external market is, the international market is still optimistic about the future of the Chinese stock market. Because, as the second largest economy, China faces this huge market with development potential, no investor in the world dares to ignore this market and hopes to promote the development of China's stock market through internationalization. For the internationalization of China's stock market, in the short term, international investors certainly do not have too many extravagant expectations, but in the medium and long term, they will not ignore this market.
The problem now is that in terms of the particularity of the current Chinese stock market, such as the main retail investors, large listed companies are mainly state-owned, the level of rule of law is not enough, and the stock market investors have too many expectations for government protection, which naturally makes the Chinese stock market far from the international market. If the internationalization of China's stock market can force the pace of market-oriented reform of China's stock market to accelerate, strengthen stock market supervision, improve the governance structure of listed companies, improve the transparency of stock market information and the level of rule of law, and gradually integrate with the international market and eventually be accepted by international funds, then this will definitely take China's stock market in a good direction. For example, after the basic liberalization of China's auto market, China's auto industry will gradually integrate with the international market and create an unprecedented prosperity in China's auto industry, and I hope that China's stock market can also embark on this road.
Also, in the short term or the stock market in the second half of the year, although the Sino-US trade friction will continue, the resulting uncertainty will increase, but there are several factors that are still conducive to the domestic stock market in the second half of the year. First, the market had expected more and heavier tariffs in the short term, but as things stand, the current second tariff list is at least not as negative as previously anticipated. Moreover, in the face of the intensifying Sino-US trade war, the Chinese government is likely to reduce import tariffs on major trading partners and is pushing a series of policies to increase domestic investment and stimulate consumption. The introduction of these policies can not only cope with the impact of the Sino-US trade war on the Chinese market, stabilize the economy, but also help the profit level of shanghai market companies to be comprehensively improved. In addition, the government is gradually introducing some financial market reform policies to accelerate the pace of marketization of China's stock market. Also, from the perspective of technical trends, the risks facing China's stock market are decreasing, and stock market investors may re-enter the market in stages. However, for the current Chinese stock market, investors still observe more and see how the funds in the international market act, and it is most important to follow the trend.
Note: Introduction to Yi Xianrong
Yi Xianrong, a high-ranking person in Jiangxi. Professor of the School of Economics of Qingdao University, former director of the Financial Development Office of the Institute of Finance of the Chinese Academy of Social Sciences, resigned in 2007. As a scholar known for his "outspokenness", Yi Xianrong's resignation has caused great repercussions on the Internet. Yi Xianrong is known as the "real estate civilian spokesperson".
In December 2010, he was publicly promoted by 300,000 netizens as one of the "Nine Influential Figures of China's Internet" alongside Dai Xu, Lang Xianping, Zhang Hongliang, Yu Jianrong, Guo Yiping, Shi Hanbing, Cao Jianhai, Sun Xiliang and others. The vast majority of netizens recognize the selection of the "Nine Heroes" and recognize that the Nine Heroes are close to "public intellectuals".
Yi Xianrong once said that I hope that I can do something to make the whole social economic knowledge, economic information, can be analyzed more clearly, see more clearly, and can provide some knowledge in this regard. As a result, on the 2nd ring, I took a car around and looked at the lights to reach a well-known conclusion, and the vacancy rate was very high.