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Deng Haiqing: Before the A-share "mad cow", the system construction needs to be fenced in advance.

March 14, 2019 08:05
source: Haiqing FICC Channel

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The current stock market water level is not high, it is a good time to improve the market system and strengthen market supervision - not only to prevent the impact of leveraged cattle on the stock market and the economy, but also to avoid the stock market disaster caused by sports supervision when the stock market is too high. The supervisory department learned the lessons of the stock market changes in 2015, took precautions and countermeasures early, and prepared for the healthy development of the stock market to lay a solid foundation for the stock market “healthy cattle”.

After breaking through 3100 points, A shares have seen significant two-way fluctuations recently. At the same time, supervision has also maintained a high degree of vigilance for the rise of over-the-counter allocations.BrokerCheck the funding risks and standardize external access. We believe that,For China's economic transformation and upgrading, the rise and fall of the index is not important, and the success or failure of the stock market cannot be measured by cattle or bears.

  The pulsed "mad cow" is not conducive to the direct financing function of the stock market, and the economic disadvantage is greater than the profit. Compared with a big bull market, we need a stock market with complete rules, effective supervision, transparent information, and rational health, so that A-shares become a market for value discovery.

  Unlike the 2015 “mad cow”, the current stock market valuation is still in a lower range, and the leverage ratio is also low.Hershey'smachine. The supervisory department can learn the lessons of the stock market changes in 2015, take precautions and countermeasures in advance, promote the sound development of the stock market, lay a solid foundation for the “healthy cattle” of the stock market, and avoid the re-emergence of “leverage bulls”.

First, the "mad cow" has more harm than good to the economy.

According to Western economics, stock market gains are indeed beneficial to the economy. The main paths include the Tobin Q effect, corporate balance sheet effects, wealth effects, expected effects, and resident liquidity effects. To put it simply, when the stock market rises, enterprises are more inclined to invest and expand production capacity. At the same time, the increase in corporate credit qualifications leads to a decline in financing costs; the increase in total resident assets stimulates consumption, while stocks are liquid assets, and the liquidity is better than fixed assets. consumption. In general, the rise in stocks is conducive to corporate investment and household consumption, thus benefiting the real economy.

However, the premise of the above theory is that stocks are “healthy cows” rather than “mad cows”, and stocks rising under “mad cows” may damage the real economy.

  1. Promote “making quick money” speculation and curb production, consumption and investment

  First talk about production.In general, the relationship between stock market and production is not large, but in the case of “mad cow”, the stock market will interfere with production. The logic is very simple, the stock market is open at work time, and China's stocks are mostly in the short-term, so the secret stocks during working hours will inevitably lead to lower production efficiency. The impact of “professional stockholders” is even greater. Full-time stocks will reduce the labor participation rate, which will be directly reduced according to the Austrian law.GDP.

  Second, talk about consumption.According to the wealth effect, the stock market rises to help consumption, but under the “mad cow” the stock market may curb consumption. Although “selling stocks” is not common, it is not impossible to reduce current consumption and invest the money originally planned for consumption in the stock market to pursue more wealth. When “the reduction in consumption caused by the pursuit of wealth” exceeds the “increased consumption caused by the wealth effect”, total consumption will decrease.

In fact, in the big bull market in 2014-2015, consumption has not improved, and even declined. Although there are other reasons, at least it shows that the stock market has very limited incentives for consumption.

At the same time, China's family wealth is mainly in real estate and savings, and the stock market investment is not high, so the wealth effect is not significant.

  Finally, talk about investment.According to the Tobin Q effect, the stock market rise is conducive to the company to expand reproduction, but in the case of the existence of the bubble, there may be a situation where only the factory circle is set up without investment. More seriously, if the real economy investment risk is high and the return is low, the company is likely to use the funds for stock trading. And if the stock market performs generally, then these funds will be used for investment. Therefore, to some extent, the stock market “mad cow” will reduce investment and encourage the tendency of funds to “disconnect from reality”.

The General Office of the Central Committee of the Communist Party of China and the General Office of the State Council issued the "Several Opinions on Strengthening Private Enterprises for Financial Services" on February 14, and the China Insurance Regulatory Commission issued the "Notice on Further Strengthening the Work Related to Private Enterprises in Financial Services" on February 25 as the "Opinions". The implementation rules provide comprehensive and multi-level policy support for private enterprise financing.Encouraged by the policy, the real economy, especially the private enterprises, has room for continued leverage. If the investment environment of the real economy fails to improve, it will not be ruled out that some funds will be transferred to the stock market and become a source of funds for the stock market plus leverage.

  2. The stock secondary market “funds vacant”, the primary market financing scale is too small

The stock market itself is a virtual economy. The main trading mode is that while one party to the transaction buys, the other party sells at the same price at the same time, and the change in the buying and selling price is reflected in the change in the stock price. simply say,In the secondary stock market, the funds are only differentshareholderThe transfer between the stock price and the stock market is not related to the real economy.

  In the case of looking at multiple stock markets, for those who obtain funds through the sale of stocks, it is more likely to wait for opportunities to re-enter the stock market instead of investing in the real economy, so the stock secondary market itself is idling funds.

However, some people will say that the bull market in the secondary market is conducive to enterprises to carry out equity financing through IPO, fixed increase, and PE. indeed,In the primary market, stocks are transferred from investors to companies. But there are still two problems:

  First, will the company invest in it after it has received the money?As mentioned above, if the company expects that the stock market investment can obtain high returns, or even “more than the money from the industry”, it is likely that the funds from the financing will be invested in the stock market.

  Second, even if the funds obtained by the company through equity financing do enter the real economy, the current share of corporate equity financing accounts for a small proportion of the overall scale of corporate financing.From the perspective of the scale of social financing, since 2010, the proportion of non-financial corporate equity financing has never exceeded 7%. The stock market's financing function supports the lack of persuasiveness of the real economy. What's more, the stock market "mad cow" overdrafted the future rising potential too quickly, and after the skyrocketing, the plunge is almostGlobal stock marketUniversal law. It is difficult for companies to seize opportunity financing in a short-term rising cycle, and the next bear market is clearly not conducive to corporate equity financing.

  3. The high return on investment brought by the irrational rise of the stock market does not equal the efficiency of high capital use.

If the market forms a consensus for a sharp rise in the stock market, then as long as the bubble has not broken,The stock market can indeed provide a high return on investment over a long period of time, but this return on investment is only for capital, but does not produce real value or GDP, that is, there is no capital use efficiency for the whole society. This will cause a lot of disruption to the real economy sector with a generally high return on investment.As mentioned above, the “earning money” effect of the stock market has taken funds away from consumption and real economic investment, and vacated in the secondary market, which is not conducive to economic growth.

  4. The stock “mad cow” may lead to an increase in the overall financing cost of the whole society.

As mentioned earlier, the role of the stock market for financing is reflected in the primary market, but the size of the Chinese stock primary market is actually very small. In the case that the central bank does not “drink water”, the stock bull market often corresponds to the bond bear market. This is the so-called “stock bond” effect, which results in higher corporate bond and loan financing costs.Since the scale of Chinese bonds and loans is much higher than stock market financing, if the central bank does notcurrencyLoose, then the financing benefits brought by the stock market may not be as good as the losses caused by the rising cost of bonds and loans.

  5. The asset price bubble restricts the operation space of the central bank's monetary policy

In 2018, China's economy has re-entered the downward trend, and the central bank has maintained ample market liquidity through monetary easing operations.In the context that the economy has not stabilized and rebounded, if the stock market reproduces the "mad cow" market, the central bank's monetary policy operation will have a dilemma:If monetary policy is tightened, it may cause the economy to accelerate downwards; if it continues to be loose, it may further blow up the stock market bubble and cause rapid accumulation of financial systemic risks.

  6. In the context of RMB internationalization, the stock market bubble problem will be magnified

In the case of relatively free flow of international capital, the issue of asset price bubbles will become more complicated. If a bubble bursts and capital flight will seriously affect the stability of the renminbi, it may even lead to a serious financial crisis.

Second, the eve of the stock market mad cow, the system construction needs to be fenced in advance

Under the background of China's economic transformation and upgrading, and the growth momentum from investment-driven to innovation-driven, a healthy stock market has become a consensus. Especially for technology-based and innovative enterprises, due to the light assets and high-risk characteristics, it is difficult to carry out debt financing. The perfect equity financing system is an important support for entrepreneurial innovation.

Take the United States as an example, the United StatesNasdaqThe success of the market has enabled the United States to successfully achieve the new economy and become an important pillar of the long-term healthy development of the US economy, maintaining global technological progress and leading position in innovation. China has also launched the GEM and the New Third Board, including the latest Science and Technology Board. The original intention is to help the economic structure transformation, industrial upgrading and technological innovation through equity financing. The importance of the stock market to the economy is undoubted.

However, the pulsed "mad cow" is not conducive to the direct financing function of the stock market, and the economic disadvantage is greater than the profit.Compared with a big bull market, we need a stock market with complete rules, effective supervision, transparent information, and rational health, so that A-shares become a market for value discovery.

Unlike the 2015 “mad cow”, the current stock market valuation is still in a relatively low range, while the leverage ratio is still low, which is a good time for reform. President Xi Jinping said that he would build a standardized, transparent, open, dynamic and resilient capital market, improve the capital market basic system, and improve the market entrance and market export. Two ways to strengthen the supervision of the entire transaction.

We recommend that the regulatory authorities learn from the lessons of the stock market changes in 2015, take precautions and response measures early, promote the sound development of the stock market, lay a solid foundation for the stock market “healthy cattle”, and avoid the re-emergence of “leverage bulls”.

  1. Improve the degree of marketization of China's stock market system

  (1) Adhere to the direction of the registration system without wavering

The direct result of the listing approval system is that listed companies are scarce resources, that is, there is a so-called “shell value”, which leads to the valuation of listed companies not only reflecting the operating conditions and future expectations, but also reflecting the premium caused by policy reasons, and this premium It should not exist in a marketized market.

The registration system helps to meet the financing needs of SMEs, reduce the scarcity of listed companies in the capital market, and help to play a decisive role in the allocation of resources. IPO pricing should adopt a more market-oriented mechanism, cancel the listing to guide PE restrictions, containHit newSystem arbitrage.

  (2) Improve the delisting system

The direct result of the lack of an effective exit mechanism in China's stock market is that the stock market's survival of the fittest is difficult to achieve, and the stock market is mixed and cannot accurately reflect China's economic situation.

There is a general understanding in the market that the Shanghai Composite Index, the main stock index of China, has long been a range volatility trend, which is significantly different from the trend of the US stock market. The reason is that the constituent stocks of the Shanghai Composite Index are all listed companies, and the fact that the poor companies do not withdraw from the market directly leads to the stock index rising.

In contrast, the US stock market, taking the Dow Jones index as an example, GE as the last founding component, was removed from the Dow Jones index in June 2018, marking the Dow Jones index has been all exchanged. From the centuries-old evolution of the Dow constituents, the blue chip camp has experienced a transition from railway companies, heavy chemical companies to service industries and new technology industry companies, reflecting the transformation and upgrading of the US economy.

  China's economy is still in the medium-to-high-speed growth range. If the stock index can reflect the economic growth, then the Chinese stock market will also exhibit the characteristics of a long-term bull market.

  (3) Improve the lock-up system

The lock-up period of stocks is too long. The intention is to prevent major shareholders from “circling money” through listing, which causes the stock market to plummet and harm the interests of minority shareholders. But the actual result is: on the one hand, the major shareholders passEquity pledgeThe way out of the field disguised, leading to longer-term stock market pressure, on the other hand, the large number of shares of individual stocks locked, resulting in the lack of effective short-selling mechanism for individual stocks in the initial stage of listing, "new", "times"New shares"The hype is everywhere.

Not allowed bigShareholder reductionIt just delayed the exposure of the company's truth and could not change the nature of the company. If large shareholders are allowed to reduce their holdings at the beginning of the listing, investors will consider this factor instead of blindly speculating new stocks, enabling stocks to achieve market-based real pricing at the beginning of the market, while solving stocks once and for all.PledgePotential risks.

  2. Improve stock market liquidity

  Enhance the compatibility with the futures trading system, and study the stock spot trading system from T+1 to T+0.The T+0 trading system can prevent investors from worrying about not being able to sell during the day, and reducing the buying situation, matching the stock index futures T+0 system, can help improve asset pricing efficiency and market liquidity.

  The study gradually eased the limit of the stock market's price limit until the price limit was lifted.The down-limit plate system has not only reduced the volatility of the stock market, but has led to the exhaustion of stock market liquidity. The stock market in developed countries generally has no limit on the price limit. However, it is not feasible for China's stock market to directly cancel the limit of the price limit, and there is a possibility that the risk of stock market volatility will increase substantially. The feasible solution is to follow the example of South Korea and gradually relax the limit of the price limit. In 1995, the South Korean stock market was limited to 6%, and expanded to 8% in 1996. It expanded to 12% in March 1998 and expanded to 15% in December 1998. Expand to 30%.

  perfectSuspensionThe system guarantees continuous trading in the market as much as possible.It is recommended to join the exchanges in the laws and regulations and the listed companies are obliged to keep stocks as continuous as possible. The ownership of the transaction determines whether the listed company should be suspended. In particular, in the stock market crash, the exchange should prohibit the suspension of trading to avoid the risk of falling. In addition, the exchange should have the right to force a transaction to resume.

  Introduce the market maker system, improve the over-the-counter trading mechanism, and improve the liquidity of the stock market.The introduction of a market maker system in the A-share market and the futures market can alleviate the liquidity crisis in extreme cases. The introduction of a market maker system can also improve the investor structure of a large number of retail investors in the A-share market to a certain extent. Over-the-counter trading can be reducedbig dealThe impact on the exchange market can play a role in liquidity supply during the stock market crash, and the restrictions on over-the-counter trading should be relaxed.

  3. Promote market long-short balance

  Research and promote the pilot of individual stock options, relax the sources of securities lending, implement the system of margin financing, and reduce the cost of securities lending.Financing corresponds to long-term stock market, and securities lending corresponds to short-selling stock market. China's current financing and securities lending system exists, but the actual operation is very different, and the financing scale is much higher than the securities lending scale. The biggest problem with securities lending is that no bonds can be melted. Therefore, studying the relaxation of securities lending sources, implementing a system of margin financing, and reducing the cost of securities lending will help promote balanced market development.

  4. Increase investor protection and crack down on illegal and illegal regulations

Insufficient punishment for violations of the stock market, resulting in insufficient investor confidence in the stock market. One of the most fundamental functions of supervision should be to ensure fairness and fairness in the market. However, in fact, the fraud, manipulation, violation of the rights of small and medium-sized shareholders, insider trading, etc. in China’s stock market are not uncommon, and the punishment for these violations is too low, resulting in The stock market is good for "circling money" and is not good for small and medium investors.

  It is necessary to clarify the legal definitions of the illegal activities of the stock market, the main body of supervision, punishment measures and criminal sentencing, and to increase the illegal cost of stock market illegal activities. Strengthen information disclosure, standardize the behavior of directors and supervisors, and combat stock price manipulation. Establish and improveStock investmentThe public interest litigation system in the field expands the relief channels for investors' infringement rights and interests and strengthens the protection of investor rights and interests. In the case of investor civil litigation, specific rules such as loss determination, scope of compensation, and enforcement measures need to be clearly defined.

  5. Strengthen investor education and foster long-term value investment concept

Investors in China's stock market are mainly retail investors, and the investment philosophy of short-term speculation is the main reason for the system. On the one hand, it is the reason for listed companies. From the institutional level, China's stock market does not allow delisting, and the punishment for violations of laws and regulations is low. Both are beneficial to large shareholders, but not for retail investors. From a long-term perspective, the most stable investment for investors is speculation.theme"Shares" and high positions profit-taking. From the perspective of listed companies, Chinese listed companies generally do notDividendAs a result, investors can only profit from the bid-ask spread, which will certainly encourage hype.

  Next, we should study the legislative issues of dividends of listed companies, strengthen investor education, increase the proportion of institutional investors such as pensions, provident funds, and foreign capital, optimize investor structure, and guide rational value investment habits.

  High leverage is a major reason for the stock market crash in 2015.This time, in response to the resurgence of off-site fund-raising, the China Securities Industry Association recently convened some brokers to hold a special meeting on regulating the external access of information systems and preventing the risk of off-site fund-raising. During the period, relevant supervisors of the CSRC were present and communicated to brokers. Claim. Relevant regulators pointed out that it is necessary to profoundly reflect on and learn from the lessons of abnormal fluctuations in the stock market in 2015. Securities companies must earnestly fulfill their main responsibilities, diligently and conscientiously, and regulate the practice requirements of securities practitioners.

  The current stock market water level is not high, it is a good time to improve the market system and strengthen market supervision - not only to prevent the impact of leveraged cattle on the stock market and the economy, but also to avoid the stock market disaster caused by sports supervision when the stock market is too high. The supervisory department learned the lessons of the stock market changes in 2015, took precautions and countermeasures early, and prepared for the healthy development of the stock market to lay a solid foundation for the stock market “healthy cattle”.

(Article source: Haiqing FICC channel)

                (Editor: DF078)

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