Will The Stock Market Get Better When It Stops Issuing New Shares?

In August 2003, China's stock market was no less difficult than it is today.

At that time, the stock market has been down from the high level for nearly two years, and there is no rebound at all.

At that time, I was preparing doctoral dissertations, and some concluding remarks were exchanged with people in the industry.

As a result, the leadership of Shanghai Securities Daily published an article in my front page: why the stock market lacks attractiveness.

And thus began a month long discussion.

At that time, people of insight, such as Han Zhiguo and Li Zhilin, made suggestions, hoping that regulators should attach importance to the balance of the stock market, strengthen corporate governance and protect small and medium-sized investors. The most important thing is to enhance the wealth effect of the stock market, so that investors can make money.

14 years later, the fundamental problem of China's stock market still seems to be unresolved.

In the last two years, the stock market has fallen from a slump to a slump, the volume is falling, the popularity is declining, and the fire is growing.

Around the development of the stock market, some people who are full of the heart of the market have put forward various suggestions.

However, the same is to protect the market, it is also hoped that the development of the stock market, the two factions view such a tit for tat contradiction to the core of the needle.

Whether we should strengthen the supervision of trading behavior or whether we should promote the three major problems of asset restructuring and backdoor listing.

If we sort out the logic, we will find that there is only one point in the so-called three problems: whether new shares should continue to be issued.

When the needle is on the wheat, it is very difficult to choose the side station.

We might as well start thinking from 2003.

What happened in the market after 2003? On the one hand, at the time of the heavy supervision of the regulators, the hyped up behavior of the auction house was basically bloodbath. Almost all the makers were defeated and the market returned to the clean blue sky. On the other hand, the market parties gradually realized that the circulation of non tradable shares should be circulated to increase the reference value of stock valuation.

Thus, through the efforts of both sides, the split share structure reform started in the second half of 2005.

Almost at the same time, the breakthroughs of Moutai and other blue chips have attracted the attention of the market, and a bull market which lasted for two and a half years has opened the curtain.

Looking back on history, "split share structure reform" actually increased the supply of the stock market, and the pressure on the stock market was very large.

After the pilot reduction of state-owned shares, the stock market experienced a very large decline.

Why can all sectors of the market accept the reform of non tradable shares and let those stocks that are out of circulation for a long time come out? Because at that time, the consensus was: the price of stocks has been very low, and the valuation is very reasonable. Even if the non tradable shares are released, there will be no great impact on the market. What's more, the non tradable shares are compensated for the circulation shares through the mode similar to 10 to 3.

Please note that the logical premise at that time was that the valuation of the stock market was very low, so we were not afraid of the impact of more stock supply.

If I ask again, why was the stock market valuated at that time very low? One of the merits that could not be obliterated was: 4 years of severe crackdown on stock market manipulation, which made China's first generation stock market almost completely annihilated.

The owner of the market has gone, and the share price has fallen sharply, even far below its intrinsic value.

How much was the drop? By the end of 2000, the median of all listed companies was 7.1, while the median of July 2005 was 1.4.

Simple calculation, you know.

The valuation dropped by 80% from high.

Now, many junk stocks are gone.

Others were retained through reorganization.

Now I can tell you: at the end of May 2005, when the stock market was in the doldrums, 626 of the 1300 listed companies had a total market capitalization of less than 1 billion yuan, of which 11 had a total market value of less than 200 million yuan.

A listed company involves money from shareholders, and it should set up a very complete reward and punishment mechanism.

Do well, like GREE, Moutai, long-term serious industry, every year dividends, should give high valuation, market resources should tilt to them.

For those shareholders and executives who deliberately hurt the interests of shareholders, they should be bankrupt and never turn around.

How can they make a show of laughter, sell billions of dollars and bid farewell to the stock market instead of taking away a cloud?

So, do you say that the sale of shell should be banned completely? Not just to sell the shell, but also to carry out the so-called asset reorganization at any time. The company should also strictly examine the resources of the listed company, and not allow the resources of the listed company to become a tool for the big shareholders to play with the market.

The experience of the world and the probability of asset restructuring has never been more than 30%. (extreme view is that the success rate is only 5%). The reorganization of most companies is just a game and a dream.

The main business is not good, which means that the management is out of order. Instead of punishing the management, instead of letting them change the game, they continue to play.

In fact, we should encourage quality companies to acquire mergers and acquisitions.

High quality companies like Tencent, Alibaba and Baidu will buy some assets and expand their scale according to their needs.

They do it.

The result of effectiveness should be encouraged and supported.

This is especially true for listed companies. The merger and reorganization of high-quality companies should not only simplify the process, but also allow for the implementation of the ex post approval system, so as to maximize their potential.

On the contrary, those companies whose profits are not as good as the average market level should urge them to do well in their main businesses and tap the potential inside the market. Only by reversing the trend of decline can they make use of the resources of the capital market for mergers and acquisitions.

You know, in 2015-2016 years, the total scale of private placement of Chinese listed companies is 2 trillion and 500 billion yuan, far exceeding the total size of all new issues.

Are these resources really allocated to the dominant companies? No, a lot of resources are wasted on the sale of shell and capital players. Otherwise, how can the stock market fall so badly?

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