Unleashing the Beast: Why the Stock Market Can Be a Ruthless Predator
The stock market is a cold-blooded animal
Yaonan
11-5-2024
On the eve of the US election, talking about China’s stock market seems to be related to the US election. Some people call this the “election of the century” because the intensity of the tit-for-tat confrontation between the Democratic and Republican candidates is rarely seen in American history. However, this election has a rare phenomenon in history, that is, no matter who is elected, it will not be good for China. Therefore, the aftermath of the election is definitely not good for the Chinese stock market, but only bad.
The stock market originated in the Netherlands and grew in London. Stock exchanges have been established in New York, Tokyo and other parts of the world. The purpose of the stock exchange’s existence is mainly to expand trade, expand production, and provide a financing platform for companies. At the same time, it also increases investment projects for investors to diversify residents’ investments. Historical lessons have repeatedly told us that only companies with normal operations can have normal stock market performance. This is an iron rule. But don’t forget that the stock market is a cold-blooded animal. If a company only relies on the performance of bubbles, it can deceive the enthusiasm of investors for a while. When the bubble bursts one day, the stock market will not care about the sadness of shareholders because they were cut off, even if they The flesh was being cut and bleeding, and there were always people standing by looking at the stock investors with indifferent eyes and crying.
What does a normal stock market look like? This requires answering what objective factors support the stock market, which must be viewed from the macro fundamentals and micro factors of the stock market.
Macroeconomic fundamentals mainly refer to the government’s establishment of a complete regulatory system for the securities market, including the listing system, the corporate financial audit system, as well as the country’s regulation of industrial development system and the composition of the country’s economic fundamentals in the process of using fiscal and monetary policies. Of course, in China under the planned system, the stock market does not completely operate in accordance with the market economy, which gives the government many tools to intervene in the stock market.
China’s stock market regulatory system has always been in a backward state. So far, there are more than 5,300 listed companies in China, which are equivalent to those in the United States. However, China’s stock market regulatory system has been criticized. Supervision was not in place before listing, and supervision was even more lacking after listing. As a result, many listed companies just want to make money from the stock market and do not care about the company’s operating conditions after listing. We have seen that the government continues to crack down on corruption in regulatory departments and has changed the personnel of one competent department after another. It seems that the problem of insufficient supervision of China’s stock market has not been changed. This is an important reason why China’s stock market stayed put while stock markets around the world were soaring in the past decade.
In the past month or so, in the face of the overall downward trend of China’s economy, many government ministries and commissions have adopted a combination of measures to provide fiscal funds, lower interest rates and other monetary tools. Other departments have introduced many industrial encouragement policies in an attempt to revitalize the stock market.
Please note that this wave of government operations has only one goal, which is to boost stock market prices. The government hopes that by raising stock market prices, firstly, it will get rid of the low valuation of listed companies, so as to boost the company’s investment confidence. The second is to allow the majority of investors to come out of the haze of being stuck and use the money they earn to increase household consumption. It should be affirmed that the government’s starting point is good, but good intentions and cruel reality often run counter to each other.
When I received calls from several friends from China, they said that they were almost all raising funds during the National Day holiday and were looking forward to speculating on a rising market after the holiday. When the market opened on the morning of October 8, they were so excited that they were in a hurry and didn’t know what to do. They were deeply afraid that they would not be able to buy stocks. As long as they could buy stocks, they would rush to buy them no matter what stocks they were. Watching the A-shares soar into the sky, I felt indescribable joy in my heart. However, when the A-shares reached 3674 points, they turned around and fell, just like a patient who had a sudden stroke. His head drooped and he could never get up again. Friends who had not been happy for an hour fell into infinite melancholy. So far, all stocks are locked up.
This is the cruel reality of this wave of government attacks.
The stock market reflects the comprehensive operating results of countless listed companies. If most companies operate normally and make good profits, the stock market will rise. On the contrary, if most companies operate abnormally and have poor profits, the stock market will fall. It can be seen that the fundamental reason for the rise or fall of the stock market is determined by the operating conditions of the company.
Looking back at China’s economic operations in the past few years, due to the rapid decline in China’s import and export trade, stagnant domestic infrastructure construction, frequent real estate financial crises, and sluggish household consumption, how can the company achieve good profit performance in such an environment? Judging from the profit data of industrial enterprises above designated size from January to September this year, the situation is even less optimistic. From January to September, year-on-year profits fell by 3.5%. In September, year-on-year profits fell by 27.1%. Inventories increased by 4.6%, and accounts receivable increased by 7.6%. %. How can the stock market continue to rise when industrial enterprises above designated size perform so poorly?
It is not clear who came up with the government’s combination of punches, what theoretical basis it has, or whether it is just an old-fashioned decision-making based on the butt directing the head. From the current point of view, does the government’s strong intervention in the economy really have a chance to promote economic recovery?
I still believe in the stock market theory. If a company is not well run, it is impossible to have a good stock market. The stock market is a cold-blooded animal. If the government wants to control it, it will only be destroyed even more miserably.