In just 10 days, the transition from financial freedom to "losing big" has occurred.
The Shanghai uncle who confidently predicted that the A-share market would reach 14,600 points has also reportedly been assaulted.
Dan Bin, the private equity tycoon who had been constantly warning of risks, has transformed from a "universally despised pest" to a "conscientious internet celebrity."
Dan Bin even publicly spoke out about Ren Zeping's "rhythm-setting," stating that as an economist, one should be rational and objective and not impulsive! He has different views on Ren Zeping's claim of "the market opens and closes" and his advocacy for a great bull market.
The reversal in the A-share market came too swiftly, so fast that it almost caught everyone off guard, prompting them to fall into deep contemplation:
After the plummet, can the A-share market still rise?
Is the enormous trading volume still insufficient?
This week, the A-share market has taught stock investors a harsh lesson.If a stock investor, after the National Day holiday, rushes into the stock market with a surge of enthusiasm, they are likely to regret why they suddenly lost their usual rationality.
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During the National Day holiday, everyone was rushing to enter the market, and securities professionals experienced an unforgettable non-stop National Day holiday, witnessing the surge in account openings and inquiries.
Although the A-share market was closed during the National Day holiday, the number of account openings at major brokerages set a historical high during the holiday.
The topic of "stock trading with loans" once again sparked heated discussions, with a significant increase in the number of margin trading account openings.
Some banks even lost about 4 billion yuan in deposits in a single day, with more than 35% of the 4 billion yuan lost flowing into the stock market, and the remaining portion still in securities cash accounts.
There are even people who directly withdraw large-denomination certificates of deposit exceeding 1 million yuan in advance, forgoing the interest, and urgently urging:
"Hurry up and transfer the money into my securities account."
Throughout the holiday, stock investors were either raising money or on the way to raising money.
Then, after a series of transfers and turnovers, the money was pooled into A-share accounts, turning into a series of flickering numbers, dreaming of making a fortune.
On October 8th, the first trading day after the National Day holiday, the A-share market witnessed history: the market turnover broke through the 3 trillion yuan mark for the first time in history on that day, setting a historical record.Private equity titan Dan Bin, however, almost against the pressure of the entire internet, loudly proclaimed, "Such a surge must lead to a sharp decline. If we get trapped again this time, all the forces that should be mobilized have been mobilized, and the resolution will be far away!"
As expected, the A-share market then ushered in a significant adjustment. Stock investors, who had been intoxicated by the continuous rise of the stock market, began to worry:
All the forces that should be mobilized have been mobilized. After creating a historical record, where is the subsequent incremental funding for the A-share market that still plummets?
Trillions of incremental funds are ready to go
In fact, apart from retail investors, we still have forces that have not been mobilized.
In the long term, we are far from the moment of "exhaustion and decline," and the market still has a huge amount of incremental funds that have not yet entered the market.
After the deep adjustment of the A-share market, on October 10th, the Central Bank immediately announced that the securities, fund, and insurance company swap facilities officially accepted applications, with the first operation scale of 500 billion yuan.
On September 24th, the Central Bank Governor Pan Gongsheng stated that he would create securities, fund, and insurance company swap facilities to support qualified securities, fund, and insurance companies to obtain liquidity from the central bank through asset pledge, enhancing the institutions' ability to obtain funds and increase their stock holdings.
In terms of quota arrangements, Pan Gongsheng made a tough statement:"The initial operation scale of the currency swap facility is 500 billion yuan, and if it goes well, another 500 billion yuan can be added, or even a third 500 billion yuan."
Not only that, Pan Gongsheng also pointed out that a special re-lending facility of 300 billion yuan for share buybacks and increases will be established, guiding banks to provide loans to listed companies and major shareholders to support share buybacks and increases.
The interest rate for this special re-lending facility for share buybacks and increases is 1.75%, with an initial quota of 300 billion yuan, and if it goes well, another 300 billion yuan can be added, or even a third 300 billion yuan.
"500 billion, 500 billion, and another 500 billion; 300 billion, 300 billion, and another 300 billion." The words of the central bank leader have completely ignited the market's enthusiasm.
All of the above funds will become incremental funds in the market in the future. Investors may not need to rush, after all, these funds have just begun to enter the market.
Of course, they will be more willing to enter the market for buybacks and increases only when the market is sufficiently cheap.
The rise of the stock market can drive social consumption and financing, affecting everything. When revitalizing the stock market becomes the will of the nation, favorable policies follow one after another.
On September 26, the Politburo of the Central Committee held a meeting, emphasizing the need to strive to boost the capital market, vigorously guide medium and long-term funds into the market, and unblock the capital market entry points for social security, insurance, and wealth management funds.
A large wave of incremental funds is on the way.Data shows that as of the end of August this year, the balance of insurance funds used in China was 31.8 trillion yuan, of which 3.3 trillion yuan was invested in stocks and stock-type funds, accounting for only 10.4%.
In comparison, this proportion is not only far below the international level of about 50%, but also significantly lower than the 45% cap stipulated by China's policies for insurance funds.
As of the end of August this year, China also had a bank wealth management market with a scale of 30.06 trillion yuan and household deposit balances close to 145 trillion yuan.
It is not difficult to see that the market is not short of funds outside the market. Compared with the 3.4 trillion yuan single-day trading volume set a few days ago during the peak period of A-shares, there is still a large amount of funds outside the market to be tapped for A-shares.
This year, with the frequent release of policy signals guiding medium and long-term funds into the market, various funds have been continuously flowing into the A-share market.
As of the end of August this year, institutional investors such as equity mutual funds, insurance funds, and various pension funds held a total of 14.5 trillion yuan in A-share circulation market value, more than doubling from the beginning of 2019, and the proportion of A-share circulation market value increased from 17% to 22.2%.
Domestically, foreign capital is also exerting efforts to become incremental funds for China's stock market.
In recent days, there has been a continuous sound of foreign capital flowing into China's stock market in large amounts.
As of the end of September this year, the global investment portfolio's total allocation to Chinese stocks was still only 5.3%, at a five-year low, far below the allocation ratio of more than 15% in 2020.
That is to say, global funds are still at a very low allocation for Chinese assets, and there is still a large room for improvement.Since both domestic and international sources are continuously injecting incremental funds into A-shares and propping up the market, why can't A-shares withstand the pressure and keep falling?
Don't fear adjustments.
There is no A-share market that keeps rising forever; the market has always been like this.
When some people are optimistic, others must be pessimistic. Just as investors are exerting their "prehistoric power" to rush into A-shares, the market has once again seen a "wave of share reductions," with hundreds of listed companies disclosing announcements of shareholders reducing their holdings and taking advantage of the situation to "run away with the bucket."
The concentrated reduction of shares by shareholders will not only withdraw a large amount of funds from the market, but more importantly, it will shake the confidence of investors:
"If the major shareholders and executives of the company have all run away, can this company have a future?"
The bearish factor of shareholders reducing their holdings has always been like a tight headband, deeply fitted on the head of the A-share market, becoming almost a bad news for every investor.
Even Professor Liu Jipeng from China University of Political Science and Law couldn't help but speak up, suggesting that major shareholders should not reduce their holdings until the dividends distributed by the listed companies reach the amount of funds raised in the IPO, in order to protect the interests of investors.
Speaking of which, there are too many phenomena in the A-share market where companies run away with the money after successfully raising funds through listing and becoming stingy.
According to statistics, there are currently as many as 1,299 listed companies in the A-share market whose total historical dividends since listing are less than 100 million yuan, and even 10 companies have a dividend amount of 0.Once, these companies were able to raise hundreds of millions in the capital market, but getting them to share a bit with the shareholders was as difficult as climbing to the heavens.
Of course, the recent plummeting of the market cannot be entirely blamed on the shareholders of listed companies reducing their holdings.
After several days of continuous increases in the A-share market, it is also possible that some investors choose to take profits and exit.
Many fund companies believe that market divergence, pressure from profit-taking positions, and a cooling of market sentiment are among the multiple factors that have triggered this round of adjustments in the A-share market.
However, such a significant adjustment always makes people doubt life, and many stock investors are panicked:
"Is the bull market gone so quickly? Will the bull market continue?"
Zheshang Securities stated that looking forward to the future market, with the rapid decline in trading volume and the outflow of short-term profit-taking positions, the market has entered the second stage of fluctuating consolidation, and the adjustment space has been relatively sufficient. It is expected that there is no further significant risk of a downward trend in the market in the short term.
The former chief economist of a securities firm, Li Daxiao, also said that the market has not ended yet, and adjustments should not be feared. The recent pullback indicates that the market is transitioning to a more stable "slow bull" market.
The vast majority of institutional investors and professionals still believe that it is a bull market now, and the market has not ended yet.Should the market really be optimistic?
Looking at the Buffett Indicator (the ratio of the total market capitalization of stocks to GDP), as of October 11th, the A-share Buffett Indicator value is 74.14%.
According to the rule, if the ratio between the two is within the range of 70% to 80%, buying stocks at this time would yield good returns, meaning the market is undervalued.
From the perspective of price-to-earnings (PE) and price-to-book (PB) ratios, after a round of increases, the current PE and PB values of the Shanghai Composite Index are still at the mid to low levels of the past decade.
As of October 11th, the PE and PB values of the Shanghai Composite Index are 14.25 and 1.33 times, respectively, ranking at the 61.79% and 23.99% percentiles of the last 10 years, and the valuation has not yet reached an extreme level.
After a rapid valuation repair, although the valuation of A-shares has moved away from the cheap range, the valuation appeal still exists. So, how far is the A-share market from its historical high?
The bull market of 2007 is relatively far away, and the peak of the 2015 bull market may be more significant for reference.
From the perspective of PE and PB ratios, the historical peaks of the Shanghai Composite Index's PE and PB values in 2015 were 23 and 2.75 times, respectively. Based on this calculation, compared to the historical peaks, the current market PE and PB values still have a 61.40% and 51.64% increase space.
If it is a bull market, there must be a new high after adjustment; if not, impulsiveness will inevitably backfire.After the adjustment, is A-shares worth investing in again?
Buffett once gave a speech, "Let me tell you how to get rich, close the door so that others can't hear. If others are full of greed, you should be careful; if others are full of fear, you should be greedy."