Abstract CNN reported on the 4th Beijing time, the first trading day of the new year, the global stock market fell sharply, investors are worried about the Chinese economy and the situation in the Middle East. The situation in China is particularly disturbing. The Shanghai Composite Index fell 6.9%, and the Shenzhen Composite Index fell more than 8%.
CNN reported on the 4th Beijing time, the first trading day of the new year, the global stock market fell sharply, investors worried about the Chinese economy and the situation in the Middle East. The situation in China is particularly disturbing. The Shanghai Composite Index fell 6.9%, the Shenzhen Composite Index fell more than 8%, and triggered the fuse mechanism. 
In Europe, the German DAX index fell 4.3%, the French CAC 40 index fell 2.7%, and the UK FTSE 100 index fell 2.4%. China is a major buyer of European goods.
According to Kit Juckes, an analyst at Societe Generale, "I didn't expect that in the days when the New Year's trading began, the Chinese stock market triggered a melting mechanism that hit the confidence of investors in the global market, and the high beta currency fell across the board."
According to a survey conducted by China Caixin Media, China’s December purchasing managers’ index fell to 48.2 from 48.6 in the previous month. If the index is below 50, it means that the manufacturing industry is shrinking.
Although the government's official purchasing managers' index is better, the big data of government data is more important, and Caixin's data is closer to small businesses.
But economists say that although manufacturing data is disappointing, it does not mean that China is facing a serious economic slowdown.
Capital Economics analysts said, "Although the unofficial purchasing managers' index indicates that the manufacturing industry is further deteriorating, other indicators show that the overall situation of the Chinese economy last month was good."
Related reading 1: 80% of the recent may trigger the second blow
On the first trading day of 2016, the market was suspended with a 5% and 7% secondary triggering fuse mechanism. This is the first trading day after the new regulation of the Chinese stock market to enable the fuse mechanism. It can be said that the fuse mechanism has come complete. The firm "public beta". In fact, the "fuse mechanism" itself is no problem. It is a way to digest emotions, find reasons, respond to problems, disclose information, etc., in the case of excessive panic in the market, rather than a simple one. Mechanically suspended trading "buttons".
At present, the "fuse mechanism" is a bit "unacceptable" in China because we only regard it as a "button" rather than a dynamic risk reduction mechanism. In addition, the Chinese stock market's melting mechanism is operated under the premise of individual stocks' ups and downs limit and T+1. The fuse mechanism actually further raises the “institutional cost†and does not play any role in protecting investors. After the first triggering of the fuse mechanism, the market has already been a thousand-dollar down limit. For these stocks, the fuse mechanism protection is no longer needed, and the second triggering of the fuse mechanism caused the suspension of trading, but the entire market cannot continue to trade. Increased panic and caused "secondary damage."
For market participants, every change in the “institution†is also creating more uncertainty while increasing transaction costs. This uncertainty itself will contribute to market greed and fear, allowing retail investors The leading Chinese stock market is more emotional. This makes a "fuse mechanism" that should stabilize emotions, but instead becomes a catalyst for emotions.
But in this downfall alone, the "fuse mechanism" is an episode of "experience", which only shows that the "fuse mechanism" has a very limited role in protecting most investors and preventing market risks. More important than the fuse mechanism, it should be to find the reason for the stock market decline. At present, the overall risk of China's economy is not large, but many enterprises face great problems. The debt ratio of Chinese enterprises is as high as 115%, much higher than that of developed countries. The average level of OECD (OECD) countries is 90%. The debt ratio is directly related to the ability of Chinese companies to cope with risks and maintain innovation. In the case of continued appreciation of the US dollar, global financing costs are rising, and China's economic growth and various economic data are still at the bottom of the stage, resulting in the flow of global funds no longer tend to China, and some professional investment institutions are difficult to sustain. Buy A shares.
Second, many of the tight monetary policies adopted by the United States have begun to enter a stage of substantial impact. On the last trading day last year (last Thursday), the Fed launched a reverse repo on 109 counterparties, which returned $474.59 billion in funds, more than one-third more than the previous record set at the end of the second quarter of 2014, the Fed. There is no upper limit for the reverse rate repurchase operation. On the first trading day of 2016, the yen, the euro, the renminbi, etc. saw large fluctuations in the opening of the US dollar. Also falling in the same period as A shares were major Asian stock markets such as Japan and Hong Kong. The Nikkei index fell by nearly 2% in about an hour after the opening. The impact of the Fed’s tightening on global stocks, foreign exchange, bonds and other markets cannot be ignored, including A-shares and Renminbi.
Furthermore, the Chinese stock market is currently facing a registration system and the lifting of the ban on January 8. (July 8, 2015, the China Securities Regulatory Commission [microblogging] implemented a 5% or more shareholder and executives to maintain market stability. The issue of “Reduce the ban†and the ban will expire on January 8, 2016 is the most direct pessimistic reason for many “ retail investorsâ€, which has aggravated the wait-and-see attitude and selling sentiment in the secondary market.
Since A-shares are policy cities and capital markets, there are of course opportunities. If the market is too pessimistic, will the policy prohibition be extended? Will there be a new bailout policy? In addition, due to the decline in bank deposit interest rates, many time deposits have begun to become demand deposits. The growth rate of M2 has increased from 4.3% six months ago to 15.7%, and the total amount has increased by more than 3 trillion. For the overall market, it is necessary to find the target of investment. If the stock market can gain more investors' trust through reform, perhaps the “buffalo†made by low interest rates can still appear.
For the recent market trend, I am more worried that due to the “fouling mechanismâ€, there will be “acclimatizationâ€. In the next few trading days, once the first fuse mechanism is triggered, the second trigger will be triggered. The probability of a suspension of trading exceeds 80%, which will amplify liquidity risk. The history has just passed less than half a year, but it is likely to repeat itself.
Related reading 2: Institutional analysis of the A-share "quick-melting" eight major causes
On the first day of the implementation of the fuse mechanism, the Shanghai and Shenzhen stock markets (including B shares) triggered the HS300 index fuse threshold twice, and the trading time ended prematurely. The agency believes that the peak of the executive ban, the new stock issuance rhythm is unclear, the end of the year profit-taking stock market ischemic, economic growth is not optimistic, fund exchanges and other eight reasons led to the market plunge yesterday, triggering the fuse mechanism. As for the market outlook, Guojin Securities believes that the market's relationship needs to be opened, Guohai Securities said that the spring market still needs to wait.
Eight reasons cause a plunge
Yesterday, the Shanghai and Shenzhen 300 Index triggered the fuse mechanism twice. Guohai Securities believes that there are eight reasons for the market crash:
First, in January, the potential lifting of the shareholder's senior executives was about 1.1 trillion yuan, and the trillions of funds were banned from flooding the A-shares. More than 5% of the shareholders' shareholdings were unbalanced.
Second, China's official manufacturing PMI of 49.7 in December, expected 49.8, the former value of 49.6, the economic growth rate is still not optimistic, affecting the market to do more emotions.
Third, from the management information, the main tone of the capital market in 2016 is “significantly increase the proportion of direct financingâ€, and the number of new shares issued will greatly exceed expectations.
Fourth, the number of A-share accounts has declined continuously in the past three weeks, and the increase in capital into the market has slowed down, making it difficult to support the rebound of the stock index.
Fifth, there may be a new round of IPOs in the first week after New Year's Day, which may have a psychological impact on the two cities.
Sixth, at the end of the year, the pressure on the table, the funds are difficult to return, the stock market is still in an ischemic state.
Seventh, before and after the year-end ranking assessment, the institutions represented by the public fund no longer have the power to protect the market, but must re-define the investment strategy and adjust the position structure, such as selling some stocks with large floating profits, which may trigger The market is turbulent.
Eighth, in the last week of December last year, the market’s expectations for the RRR cut by the Chinese central bank were once again lost. In fact, not only did the market expectation of delays fail to cash, but the central bank’s open market currency supply also shrank significantly, reflecting the obvious delay in loose expectations. Since November last year, the loose monetary policy has been absent for two consecutive months.
Guojin Securities' strategy team said that the recent small changes in the market attitude of the regulators are the trigger for the market to fall, and the fuse mechanism operates on the first day, ignoring the risk of liquidity provision, which is the main reason for deepening the market decline. .
In January this year, the market environment was different. The ban on easing was just around the corner, and the policy was urgently hedged. The hypothesis that the market expects the new shares to be issued in January is falsified. Objectively speaking, the implementation of the "fuse mechanism" will inevitably affect the demand for liquidity. In order to meet the demand for redemption of funds, market participants will passively reduce their positions, thus deepening the space for market adjustment.
Lin Caiyi, chief economist of Guotai Junan Securities, believes that the threshold set by the fuse mechanism inadvertently gives the panicked investor a clear “stop loss†target: the HS300 index triggers the fuse for 2 hours and 15 minutes for the first time, and triggers the second threshold (7). %) only took about 5 minutes. In the 5 minutes trading time, the decline of the Shanghai and Shenzhen stock markets was accompanied by a significant increase in the transaction, apparently because investors sold before the second threshold was triggered.
The market outlook remains to be seen
Zhongrong Fund believes that the implementation of this fuse mechanism will greatly increase the liquidity risk of the market, causing the price and liquidity to be out of touch. The form of price and volume is no longer a market-oriented trading behavior, which makes the market price appear. The deformed state is prone to extreme trends.
Guojin Securities said that the three “sales†of the market outlook will be untied: it is hoped that the regulatory authorities will make relevant statements as soon as possible to stabilize the market. Any financial innovation needs to be gradual; hope that the regulatory authorities will give relevant information on the rhythm of new shares issuance. Clearly expected, how much will be issued in January; it is recommended to clarify the hedging policy after the expiration of the ban in January as soon as possible. In general, only the expected stability and stable market are the win-win markets.
Guohai Securities believes that the spring market still needs to wait. At present, the big logic still exists, but the RRR cut was expected to fall in December last year. The market is worried about whether the performance of the GEM will increase after the increase, which will cause the spring market in 2016 to be a little later. The overall strategy is still recommended to avoid the sector with a large increase in the previous period. From a short-term catalyst perspective, focus on the steel and military sectors.
Lianxun Securities said that it would tactically evade individual stocks that will face lifting in the near future, especially those with a price increase of more than 50%, a market value of the lifting of the ban, and a market value of more than 30%, and a higher valuation may have a stronger selling pressure.
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