Registration System Many People Actually Do Not Understand.

Thursday, January 14th.

Affected by the sharp drop in European and American stock markets, the Shanghai and Shenzhen stock market plunged again in early trading and broke 2900 points for a time, closing to a low of 2850 points on 26 August 2015.

Subsequently, in the efforts of the security fund, the market gradually stabilized, closing the Shanghai Composite Index rose 58 points, return to the top 3000 points, the gem has also seen a strong rebound.

But overall, the market is still out of danger.

To hedge against market pressure, from the closing of January 13th to the opening of January 14th, management has done or announced 5 things:

1, Li Keqiang hosted a meeting of the Party committee of the State Council to learn and implement the important speech spirit of general secretary Xi Jinping at the six plenary session of the eighteen Central Committee of the CPC, and to push forward the work of building a clean and clean government and anti-corruption in the government system.

At this meeting, he stressed the need to "severely punish all kinds of illegal activities in the financial field".

This is actually a call to the market, and a severe warning is given to the possible irregularities in the stock exchange double kill, especially the collusion between officials and merchants.

2, the SFC once again explained the time and intensity of the registration system. It reiterated that registration system reform is a gradual process and will not be implemented in one step. The issuing rate and price of new shares will not be released at once and will not cause large scale expansion of new shares.

3, the two big exchanges declared that they should pay close attention to the reduction of major shareholders.

It has been reported that the exchange has interviewed some companies with reduced willingness and played a certain role.

4, before the opening of January 14th, the central bank announced that it will carry on 160 billion yuan 7 days reverse repurchase operation.

In addition, the open market in January 14th has 70 billion yuan 7 days reverse repurchase expires.

In this way, the central bank will release 90 billion more water at this dangerous time.

5, with the encouragement of management, a large number of listed company's major shareholders promise not to be reduced within a certain period, including many GEM companies, which release positive energy to the market.

Recently, the continuous decline of stock market has triggered a series of risks: 1, part of the financing plate began to face the pressure of closing or supplemental margin; 2, part of the B is facing a downward trend of risk, investors may lose a lot; 3, large shareholder equity pledge, because of the reduction is blocked, in the context of a big drop, large shareholders need to raise funds to supplement the margin, or increase the number of Pledged Shares, or can only apply for the suspension of listed companies.

Since the beginning of the new year, the issue of China's stock market has aroused great controversy.

My view is that the biggest problem in China's stock market is that the basic logic is wrong.

China needs to raise the proportion of direct financing significantly, with steady growth and promotion.

There is no dispute about this.

To achieve this, large capacity expansion is inevitable.

Through registration system reform, it is no problem to return the right of listing to enterprises and the market, and promote the market-oriented reform of China as a whole.

But the question is, under what circumstances should we introduce the registration system?

Since 2013, I have expressed an important point in the column: the registration system should be launched in bear market, and the 2000 point is an ideal place.

That is to say, if we do not start the policy bull market since the second half of 2014, we should strengthen legislation and change the functions of the SFC and exchanges.

Then the registration system is introduced, and the problem can be satisfactorily resolved.

The beauty of registration system lies in that the desire to issue new shares and reduce shareholding by large shareholders will be balanced in a free market which is fully regulated by the market.

If the median price earnings ratio of China's stock market is less than 20 times (now 70 times), then the desire of large shareholders to escape and the desire to sell new shares at a high price can be greatly curbed.

Investors can also buy really cheap stocks.

Even if the new three boards and the market value of the equity trading centers are not calculated, the total market capitalization of the three main boards, the growth enterprise board and the small and medium-sized board market in Shanghai, Shenzhen and Hongkong will reach about 70 trillion yuan.

China's GDP, according to expert research, is basically equivalent to GNP.

In this way, we can calculate that the current "Buffett index" is around 110%.

That is to say, according to the "Buffett index", China's stock market has been overestimated.

If we overestimate the importance of this system, we will let China go through the registration system.

The doubling of market value will be astonishing and unsustainable.

Because our total M2 is only 137 trillion.

To support the large capacity expansion under current valuations, we can only print banknotes.

The consequences will not be envisaged.

Therefore, we can only choose two options: accept the fact that the stock market is down, at least squeeze out most of the bubbles, and then engage in the registration system; or explicitly announce that the registration system is postponed, and for some time a bubble will be played.

But in the long run, squeezing bubbles is inevitable.

The registration system reform in Daniu city will inevitably bring about a great escape.

In the case of stock being overvalued, large shareholders certainly have strong desire to cash in on profits, and the listed companies also have strong desire to issue new shares and increase their money.

In my previous article, I discussed the issue of "Buffett index", which means that the total market capitalization of stock market is divided by gross national product (GNP).

When the ratio is between 70% and 80%, it means that the stock market has potential to buy.

If this ratio is higher than 100%, especially, the stock market risk is relatively large.

At present, the market value of the US stock market is around us $25 trillion, and the gross national product is less than US $18 trillion. The ratio is about 140%.

That is to say, the United States

The valuation is too high and the risk is too high.

But you know, the United States is a global market, and many foreign companies are listed in the United States.

What about the Chinese stock market? The Taiwan area is rather special.

The total market capitalization of the Hongkong stock market is about 21 trillion yuan, of which the market value of H shares, red chips and mainland private enterprises accounts for 62% of the total market value of Hong Kong stocks, accounting for 73% of Hong Kong stocks.

Therefore, the Hongkong economy and the Hongkong stock market are highly related to the mainland. We need to consider the Shanghai and Shenzhen stock markets together.