Dr. Z's brain | don't stop the pace of reform, don't let unicorns become poisonous horns

Unicorns made waves in A shares. Many people question, unicorn, you are so poisonous, you are so poisonous, you are poisonous, you are poisonous.

Who is more poisonous than the "unicorns" and scallops?

For the return of "unicorns" to the A-share market, the negative sentiment in public opinion seems to occupy a major position for a while. One theory is that "unicorns" are "poisonous."

"Toxic" is, of course, a very harsh accusation, but quite abstract. What is "toxic"? How is it "toxic"?

"Novice" driving, compared with the original market "veteran"?

For example, will it be more "poisonous" than the scallops that Can Zhangzidao can pinch and can fly?

On the evening of October 30, 2014, Zhangzidao released the third quarter report of 2014, and the performance suddenly "changed face", turning from profit to huge loss of 812 million. The reason is that the North Yellow Sea encountered an abnormal cold water mass, and the Ezo scallops worth 700 million yuan planted in the sea a few years ago were "extinguished". The market reaction was strong and stunned; by the beginning of 2018, Zhangzidao scallops were in a new state and once again collectively "fled" to complete the historical great cause of the sudden company's "loss" in 2017.

Of course, these scallops are both old and spicy, and can be called "old poisons" in deep water. Because just in October 2017, they were still free and comfortable in the place where they were "wandering", so that the financial statements were shining, the company's market value was still strong, so that the next December when the company's two shareholders significantly reduced their holdings, cash out very satisfactorily. As soon as the reduction ended, they were obligated to go away, leaving the endless financial black hole to the majority of shareholders. In the "escape" incident in 2014, there were also many "up and down hands" behind it.

Of course, there are also Jia Accountant, who "returns to China next week" and "suffocates together", and Xiao Yanzi, who is "not a driver" far better than the old driver. These are celebrity effects. Other people who are not thunderous in the world, in addition to the "empathetic" scallops, there are probably many cases. Even if it is a little ordinary, there are two suites found that there are two suites when the company's performance is unable to return to the sky, so as to step up to the sky. In short, the overall asset quality and the company's operational capabilities are always stunned.

Who is more poisonous than the "unicorns"?

The valuation is too high, whose "poison" is it?

Another "argument" for "toxic" is the idea that "unicorns" will be overvalued.

But hasn't the valuation of A-shares itself always been too high?

Since the beginning of trading, the average price-to-earnings ratio of A shares has been around 40 times, which is much higher than the 20 times or even lower level of mature markets.

Look at a share and h share (Hong Kong stock). In the bull market of A shares, the premium for H shares is about 70%, and when it is low, the A share market is also more than 20% higher than that of H shares. Not only that, no matter what kind of "pass" mechanism, its original intention is to create market connectivity, that the price of A shares and H shares will be in line, and the gap will eventually disappear. But it backfired, and the ah share spread grew wider and wider. The Hang Seng AH Premium Index was basically stable at around 95 from January to November 2014. However, after the opening of the Shanghai-Hong Kong Stock Connect in November 2014, the Hang Seng AH Premium Index began to soar, rising to a maximum of 150.

An extreme case of two listed stocks receiving completely different valuations is the GAC Group. In June 2015, GAC Group's shares surged 49 percent on the mainland due to increased government support for the automotive industry, but the stock rose only 3.8 percent in Hong Kong stocks over the same period. Its a-share is 281% premium to the h-share.

Bank stocks are also a good example. At the beginning of the opening of Shanghai-Hong Kong Stock Connect, almost all studies claimed that the premium of the vast majority of H-shares in the listed banks in ah and hong Kong would help A-share banks to repair their valuations. However, less than a year after the Shanghai-Hong Kong Stock Connect landed, the listed bank stocks of the two places often fell into the situation of A-share premium and H-share discount. In the second half of last year, the valuation of a shares of nine listed bank stocks in the two places was a comprehensive premium to that of H shares, and the premium rate reached a maximum of 52%. This means that the valuation of H shares of the same bank is already less than 50% off a share. That is to say, going to Hong Kong to "buy, buy and buy" designer bags is outdated, and it is fashionable to buy "discounted" bank stocks. It should be known that when bank stocks were "discounted" relative to the mainland, the performance of the Hong Kong stock market last year was eye-catching on a global scale, and the Hang Seng Index, which represents the overall level of the market, has risen by nearly 43% from the bottom.

The premium of a share to b shares has also remained at a high level for a long time.

Therefore, we will often see that non-independent Internet "upstarts", some real estate tycoons, etc. also want to "return".

Is the valuation too high, is it a unicorn problem, or a problem in the A-share market?

Is the idea of doubt "toxic"?

There is also a saying that the "unicorns" have passed the "growth period" and have been "harvested" almost. Now that we are returning, isn't it that the "fancy years" are gone, and the "slag" of the "residual flowers and willows" that are left let us chew?

In fact, compared with other "small partners" in A-shares, the unicorns that come back from the CDR route will be a refraction of US stocks and Hong Kong stocks. With the valuation standards and related conditions of mature markets, the valuation of unicorns may be more difficult to hype.

The thing about "growing up" is even more interesting. The growth of a company always changes in long-term dynamics. It is best if you can start investing from a small time, but after the company becomes the industry leader, a good company still has a long-term development plan and long-term investment value. Otherwise, is it that even ge or Coca-Cola stock has "gone through the growth period" and has long since lost its value?

Moreover, whether it is a unicorn or not, the company's focus is on management and operation. Today's world is changing rapidly, today is the industry leader, perhaps tomorrow will be eliminated by the industry, such as Kodak, Motorola. Even a company like Yahoo was a unicorn that rode the dust, but then had to retire. And Apple, after experiencing success, experiencing failure, experiencing success, and possibly experiencing failure, can it still succeed again? The "growth phase" doesn't have to be just one. The Internet itself has survived the bubble period and the bursting period, turning over and seeing a new world. Whether or not to invest is up to you to judge. At this time, there is investment value, and it is not necessarily necessary to have investment value in the future. At this time, the value is flat, and it is not necessary that there will be no peaks protruding in the future.

The prosperity of the moment and the decline of the moment are the true face of the market and the actual meaning of the market. Who can guarantee that the company will always be prosperous? Who can guarantee that investing will always make money?

In the final analysis, the essence of some so-called "questioning" statements still reflects the usual in our market that does not attach importance to "value investment", does not pay attention to the company's operational capabilities and product service value, but blindly attaches importance to the idea of "speculation" investment to quickly earn the difference. This kind of thinking is really "toxic".

Can't "love to answer", should "warmly embrace"

There is also a saying that these "unicorns" "look down on me" in the past, and now that they have exhausted their spirits, we should also "love big and ignore".

However, in that year, some "unicorns" went to other places to list, which had both "envy" factors for other markets and constraints on the domestic market. At that time, the "unicorn" did not have the influence of today in terms of concept, idea and company scale. I have to say that with the past thinking of the A-share market, the willingness to leave them is not strong, and the threshold left for them is too high. This is probably not a story of "at that time you thought I was poor", this is at least a story of "who was Xiao Qingxin at that time, who was a local tycoon, who was not sure who was wrong".

Unicorn company is the term for the investment industry, first proposed by a Silicon Valley venture capitalist Aileen Lee in a tech media report referring to startups (unlisted companies) valued at more than $1 billion. The reason why it is described as a "unicorn" is precisely to illustrate its scarcity.

The first unicorn business appeared in 2009, and since then the number has grown slowly. By 2014 and 2015, the number had increased significantly. According to CB Insights, there were 220 unicorn companies worldwide as of December 2017. The companies are all valued at more than $1 billion, with a total valuation of $763 billion. Compared with the 88 companies announced by Fortune in early 2015, the number increased by 1.5 times. The accelerated formation of highly valued start-ups after 2015 indicates that the world has entered a period of vigorous development with the rise of emerging industries and active venture capital.

Science and technology has always been an important productive force, and the current era of science and technology to change the fate of mankind, the capital market can not effectively and efficiently promote enterprise innovation, it can not assume due responsibility for market vitality and national strategy.

In this situation, we should not only not "love and ignore" the "unicorn", but also "warmly embrace".

We must first admit that it is a good thing to attach importance to innovative enterprises, or to open a "return" path for overseas high-quality "unicorns", aiming to provide a development platform for domestic innovative enterprises and thus serve the national strategy through the capital market.

Don't let unicorns become "poisonous" horned beasts

Naturally, the "worry" about unicorns is not unreasonable.

China's financial repression has a long history, and although the capital market is actively reformed, its system is still quite backward, and its rigidity inevitably brings about the thinness of the market. In this context, on the one hand, the capital market has become a tool for some "fortunate" listed companies to greedily raise funds, and on the other hand, it is difficult to provide support for a large number of potential enterprises. Due to the backward concept of the capital market, many reforms may not really find the "cause" and "root cause", but many times it is still aimed at superficial prosperity, and it is gradually distant from marketization. Because of the "fear of difficulties" mentality brought about by market fluctuations, the inconsistencies in policies have become more intense, which has further greatly damaged the already fragile market fairness and market confidence.

The huge controversy caused by this "embracing unicorns" actually stems from this. What the public is concerned about is whether this is another short-term initiative to pursue superficial good looks.

This initiative should still be interpreted in a longer period of time. After the stock market crash in 2015, the world was shocked, and the regulatory authorities were painfully determined; since 2016, the regulatory thinking has been renewed, rearranged, and the measures and intensity have been deepened; in 2017, supervision has entered a new era, and strengthening supervision has gradually achieved all-round, full-time, long-term and institutionalized. It should be said that this reform has still grasped the "bull's nose," and has both means and determination, does not pursue short-term achievements, does not give up long-term strategies, and is really fighting a "tough battle." In the future, the market should continue to move in the direction of marketization, and the registration system will also be promoted step by step.

However, if you want to complete the "marketization" and achieve the "registration system", you need to solve the various chronic diseases left by the market in the past few decades. On the basis of rectification and liquidation, the market also needs to gradually expand and drain. That is to say, the market should be deterred, but also soothed, clear, but also cultivated. Under this concept, it is not difficult to understand that after strengthening the supervision work for a period of time, it is necessary to expand the market accordingly, and in view of the arrival of the new economic era, scientific and technological innovation is crucial to the market and even the development of the country, and it is a better choice to inject vitality into the market with innovative enterprises as the "entry point".

Next, when the capacity of the capital market expands and there are more choices, it is believed that the delisting and transfer mechanism will be gradually improved, and the threshold of "approval" will be gradually lowered, so as to complete the marketization process of the real survival of the fittest step by step.

The market must not be mistaken for thinking that this is a "release of water" or a "Great Leap Forward".

And the regulatory level must also pay attention not to stop the pace of reform, do not let the unicorn dye into a "poisonous" horned beast.

postscript

On the other hand, many "doubts" are actually not questions about "unicorns", but questions about the construction of the A-share market mechanism behind them.

Sadly, while questioning the bad rules of the old market, people are accustomed to these bad rules, so that they have rebelled against new reforms aimed at straightening out and changing bad rules, which is tantamount to a "self-harm" after a "self-deprecation".

If the current strong regulatory measures and the current deepening of securities market reforms are carried out as scheduled, then this move should only be to give more choice in the market, both for investors and for enterprises. This is definitely not to let anyone "make money", but it certainly gives everyone a choice of more opportunities to "make money". Further, this initiative is nothing more than an "entry point" and a middle item.

Of course, no matter which time or which reform is good, we must consider more policy details, and adhere to the construction and improvement of the system, so that the market can be open and fair to the greatest extent.

Are "unicorns" gods or demons? Pull it out for a walk. The more open and fair the market, the more fair the evaluation and valuation can be obtained.

(The author is Wan Zhe, an economist and a special commentator of The Paper.) ）