Can Registration System Be Launched Next Year? Five Major Misjudgments On A Shares

The problems faced by China's stock market, like those faced by the Chinese economy, are all very severe and are in a dilemma. If in the past, there could be a solution between long pain and short pain. Nowadays, faced with many bubbles, we must be careful and deliberate. This is a demand for investors to take advantage of the derivatives market to avoid risks. The enrichment and development of the derivatives market is beneficial to the long-term prosperity of the capital market and the healthy development of our financial industry.

Because of the unclear understanding of A share rules, many people have many misjudgments about the stock market. I conclude that there are about five major misjudgments:

First, the A share market is short bear. In fact, if it is carefully calculated, it is a bear market. Because we mainly focus on the card composite index, which represents the market capitalization of large market capitalization stocks, the performance is not good, but the performance of card 500 and Shanghai 380 are much better than that of Shanghai Composite Index or Shanghai Stock Exchange 50. According to Haitong strategy team's statistics, from 1996, the average duration of A share bull market is 20 months, the bear market is 10 months, and the concussion is 25 months. The reason why A shares can maintain high share prices for a long time is related to the liquidity of the market. Liquidity premium is very low, which is also related to the careful care of the management. This leads to a low credit premium or even a negative premium, so its overall risk premium is relatively low.

The second mistake is that the loss of money by individual investors is not guaranteed by management. In fact, the A share market is an overprotective market, which is similar to the rigid payment of the bond market. Because A shares basically did not strictly implement the delisting system, so basically no delisting, so that the credit premium is very low. The main reason for the loss of personal investors is high-frequency trading. This year is coming to an end, so the expected turnover rate is still reliable: the turnover rate of gem is about 1200%, that is, 12 times a year, and 10 times for small and medium boards, 6.3 times for the main board. Why is the A share market a casino? Because our turnover rate is much higher than any other stock market in the world. This is not surprising. What is even more surprising is that the retail turnover of the market accounts for 85% of the total market, that is, the annual turnover rate of retail investors is estimated to be between 24 and 28 times. If more than 20 times, it belongs to high-frequency trading.

If the stock is not traded, it will buy all the shares (about 1340) at 6124 points in October 16, 2007, with an average gain of 107% last week. Of course, this data is too high, because the biggest decline will not exceed 100%, but the biggest increase can exceed 1000%, so the average data is larger. However, the median increase of these 1340 stocks is 55.4%, of which 353 stocks are negative earnings, accounting for only 26% of all stocks. In the same period, the Shanghai Composite Index fell 42.5%, indicating that after the highest purchase, the A share market performance in the past 8 years is not bad, and the median annual rate of return is 5.6%.

More than 60% of individual investors lose money because of frequent trading transitions, because transactions are motivated by greed or fear, which will lead to high buying and low selling, and the more frequent transactions, the greater the probability that ordinary ordinary retail investors will lose money, because investment itself is a game against humanity.

Third misjudgments: blue chips have rare investment value. Why did we lose the market in the past, or did we buy too many low price earnings ratio stocks, such as cement, coal and banks, and blue chips have rare investment value? From China's stock market to now, if we buy junk stocks and hold them for a long time, the rate of return will be very high. This is the characteristic of this market. If you want to make money, as long as you don't buy SSE 50 or Shanghai and Shenzhen 300, you can buy a combination of SSE 380, and now the income is more than double that of 2007. For example, buying a stock in 90 years and holding it to date will yield 230 times, which is far ahead of Buffett. As investors, we need to be familiar with the unique rules of the game in the Chinese market. As regulators, we need to know how dangerous the rules of the game are, which will lead to bad money driving out good money.

Junk stocks have long held value in the Chinese market, because each A share has implicit warrants, many small cap stocks are losing money, but the share price has been rising. How to explain it? Because it has the possibility of being injected into assets, and it may be backdoor. If the backdoor sports media, Internet finance or environmental protection, or graphene, the implied warrant price will grow crazy, though its valuation level will fall.

For example, at the end of 14, a stock with a P / E ratio of less than 20 times (less than 200 of the price earnings ratio was deducted from non recurring gains and losses), to date, the median increase was 22%, while the median increase in buying a P / E ratio of more than 200 times (including the performance loss of the negative P / E stock, more than 800) was 56%. Of course, the best performance is the early price earnings ratio of 50 times to 75 times between 330 stocks, an average increase of 65%.

If the time is lengthened, the conclusion is also consistent: high P / E and loss share have a higher rate of increase. According to the calculation of non recurring gains and losses, the median increase of all 2023 A shares has been 69% in the past 5 years since December 31, 2010. The median increase of 165 stocks with a P / E ratio of less than 20 times was 63%, while the median increase of 462 times higher than 200 times PE and loss share was 99%.

So this is the way to play the Chinese stock market, unlike the US. The rotten companies in the United States will directly withdraw from the market, where is the possibility of backpacking? In Hongkong, they become penny stocks, and in the mainland they interpret the story of the black chicken becoming Phoenix, and this possibility is very great. Because management always takes responsibility for the stability index to itself, and frequently suspends the issue of new shares, and the issuance is limited and limited, lest the interests of individual investors be damaged.

In contrast, the performance of A shares with large market capitalization is not good. What is the reason? It may be the nature of the industry - the traditional cyclical industry, and the ownership attribute of state-owned enterprises. However, the premium of these large cap stocks and H-shares is not high, indicating that the valuation level is relatively reasonable. But reasonable valuations will not be pursued in the market where the retail investor has pricing power.

But in the long run, is it necessary to let those castles in the air that have been built in these years remain unchanged? Or do we have to push back and build an open, transparent and healthy market? The stability index will avoid a sharp rise and fall in the short run, but in the long run, the valuation distortion and stock bubbles will continue.

Fourth misjudgments: the investment philosophy of the A share market will be in line with the mature market. A shares Will be in line with H-share. Recently, the HKEx has also launched an index futures based on A+H premium, which will definitely shrink in the future. This is the potential investment opportunity. Now the difficult problem is when we can narrow down, so in the past, our investors have been misjudged. With the opening and maturity of the market, the A+H price gap has narrowed. The concept of price investment will be reflected and will be in line with international standards, but the fact is not immediately integrated. Looking back on history, the opening of B shares to domestic investors in 2001 was introduced. But in the past 14 years, the difference between A shares and B shares has not narrowed, but has expanded. Similarly, Shanghai and Hong Kong launched last year, resulting in this A+H The spread is also widened. Therefore, if we really want to make the value investment concept popular among the people, we must break the regulation, reform and open up, and protect the A share price, so that bubbles and stock prices will distort. It was courage and courage to break the dual track system of commodity prices.

The fifth mistake is that stock index futures are a major cause of the stock market crash. The stock market crash is mainly due to the high level of stock market valuation and the obvious bubble. As mentioned above, the average price earnings ratio has huge deception. As of today, the median price earnings ratio of all A shares is 99 times, of which the median price earnings ratio of the motherboard is 85 times, the small and medium board is 96 times, and the gem is 121 times. If the non recurring gains and losses are deducted, the price earnings ratio of the main board is about 143 times, which is as high as that of the gem, and the deficit is expanding. If we add leverage to such a high valuation level, it will be hard to avoid a sharp fall if there are too many over-the-counter funds. In this regard, I think there are many reports that there is no correlation between stock index futures and stock market crash. I also think that stock index futures can spread risks and play a role of value discovery in the long run.

The fundamental reason for the high share price is that the stock supply is too small, the supply is not marketization, the pricing is not marketization, and the quota liberalization is not marketization. If financial innovation is liberalized, the supply side will get a better change. This is also beneficial to the long-term prosperity of the market.

This is the topic of registration. We are very worried about the registration system coming out next year, and it is another round of stock disaster. It is precisely because of this worry that I believe that the introduction of registration system should be a gradual process. As the SFC spokesman said, "registration system reform will adhere to the marketization and rule of law orientation, establish and improve the system of the main responsibility of the market players, protect investment, facilitate financing, grasp the relationship between the pace of reform, the intensity and the affordability of the market, and make overall plans and step by step, so as to ensure the stable operation of the market."

Therefore, the biggest challenge to the registration system will be how to release the pricing issue. At present, the issuing price is no more than 24 times price earnings ratio, but the whole market P / E ratio The median (after deducting recurring gains and losses) is 135 times. This can explain that most of the current IPO premiums are between 3-5 times. By contrast, the price earnings ratio of mature markets such as the United States is only about 17-20 times that of the bull market. China is in such a high valuation, it is necessary to maintain stability and reform. Therefore, I estimate that the registration system will be more important than substance in the coming year.

In 2016, when the registration system was launched, investors would expect the style to change, that is, the undervalued stock will usher in spring. I do not think such a possibility is ruled out. But looking back at the transformation of China's economy, it is easy to see that the decline of "old China" and the rise of "new China" are irresistible. How much more room does the stock price ratio of less than 20 times increase? I have no prediction ability, but I do not think that the inflection point will appear.