Liu Ligang: Watch More Opportunities For China'S Stock Market.

After experiencing the disappointment of the market in 2011, China's stock market, especially the 10 year zero gain of China's stock market, prompted us to think seriously about China in 2012.

Before launching the analysis, it is necessary to answer a lot of questions first.

The author believes that China's stock market is facing structural and institutional problems.

In the past 10 years, the stock market has brought considerable wealth effect, but most of the wealth effect is reflected in the primary market.

Judging from many objective indicators, the price earnings ratio of new shares has almost been overdrawn at the time of issuance. The development value of the new stock market in the next few years will almost disappear after the "new speculation" in the initial stage of listing.

In other words, the two tier market can only look for a rare "dark horse". It is not surprising that most investors lose their stocks in the stock market.

What needs to be seen is that such a structural contradiction has begun to unravel gradually after the massive decline of the stock market in 2011. This is reflected in the large losses of securities companies, the increasing difficulty of IPO, and the ebb and flow of new enthusiasm.

The author believes that when the primary market can not bear the wealth effect, China's stock market is forced to return to the fundamental issues such as fundamentals and investment value. Only at such a time can the "economic barometer" need to really refer to the actual performance of the economy.

From the perspective of China's economic fundamentals, I am not worried about it.

From a broader perspective, we need to consider the economic prospects of Europe and the United States.

Europe's risk factors are gradually easing, mainly reflected in the European Central Bank has more in-depth financial and financial system liquidity relief, such as the end of February, the European Central Bank announced the implementation of a new round of refinancing operations, the euro zone commercial banks to provide up to 500 billion euros three year loan, this is unprecedented, but this is just the beginning.

With the support of the European Central Bank's liquidity, there will be a large improvement in the liquidity of the global market, which will also help to improve the performance of the stock market.

At the same time, after several years of weakness, the performance of the US economy is more worthy of market expectations.

The Fed's "twist operation" provides us with a longer period of liquidity support for the US economy, which means that arbitrage trading will get a longer window, and asset prices in emerging economies may also be supported.

More importantly, American companies holding large amounts of cash are likely to find more investment opportunities at home and abroad after the economic prospects are improving.

Although the US economy will still face financial constraints, its structural adjustment has taken an important first step.

The author believes that under the support of relatively good external factors, China's stock market will face fewer external uncertainties in 2012, which will help reduce the volatility of China's stock market and attract more capital to enter.

From the domestic factors, the overall looseness of liquidity is conducive to boosting the performance of China's stock market.

Judging from the performance of the past 20 years, although the performance of China's stock market can not fully reflect the liquidity situation, the tightness of liquidity still has a significant impact on the performance of the stock market.

China's bull market in the past 2007-2008 years has been accompanied by a rapid increase in M1 growth.

In a wave of stock market rises in 2009, extremely loose liquidity also provided strong support for the stock market.

Similarly, the decline of the stock market is often accompanied by tighter liquidity and monetary policy.

These also mean that the loosen liquidity this year will likely bring a wave of rise in China's stock market.

In addition, from the perspective of the overall capital flow, the real estate market will face downside risks in 2012 due to factors such as "restriction" and so on. At the same time, the rising price of funds may lead to a drop in willingness to invest in real estate, which will also attract funds with high risk preference into the stock market.

At present, relatively low stock prices also guarantee a relatively small downside risk of new funds.

From the perspective of policy factors, the Bank of China (601988) has postponed the implementation of the new Basel Capital Accord as a whole, which is also conducive to the improvement of the credit situation.

The SFC's more stringent dividend regulations and the possible launch of the international board in the future have become an important reason why I am cautious about the performance of China's stock market in 2012.