The characteristics of the current market segmentation are very clear, since this year, the stock market has risen by 14.7%, while the start-up board has fallen by 11% over the same period. What is the reason for this segmentation? If we define the majority of the small notes represented by thematic stocks, concept stocks, sub-new stocks, high-value black five, etc. as the eight-class of stocks, and define the low-value, large-scale, blue chip, white horse stocks as the second-class of stocks, the trend of the two-eighths has become more intense in the last year.
Since the second half of last year, under the influence of multiple factors such as the economic cycle, structural transformation upgrades, supply-side reforms, global economic recovery, the Chinese economy ended downward, the signs of the bottom of the cycle are obvious. Specifically, they are: GDP growth stopped declining, fixed asset investment growth, electricity generation, rail transport volume stopped falling back, commodity price indices such as steel and coal, PPI reversed from negative, PMI entered the outlook zone, cyclical sector performance recovered, the global major economies began to improve, the global economy began to recover significantly.
The fundamental shift in economic fundamentals is the fundamental reason for deciding the trend of the two-party split.
An important reason for supporting the high valuation of the eight classes of stocks is the liquidity overflow, the monetary environment. Due to economic fundamentals, the regulatory authorities have strengthened asset bubble and financial risk prevention measures, the Federal Reserve has entered an interest rate cycle, and other reasons. Since 2016, the monetary cycle in our country has entered a tightening cycle, the capital side has been tightening, which has led to the gradual withdrawal of speculative funds from the market, the market preference has fallen sharply.
Speculative hype, relative scarcity, mergers and acquisitions, deferred growth and market cap management, are another important reason for maintaining high valuations of the eight classes of stocks. After the stock disaster, the new chairman of the SEC took office, especially after the second half of the 16th year of the establishment of the core, the entire financial regulatory environment was transformed from the original hype to strong regulation, risk prevention, deleveraging, and regulatory environment reversed. In the large regulatory environment, speculative hype, back-of-the-envelope trading, landlordship, market cap management were greatly undervalued, and speculative funds were significantly withdrawn from the eight classes of stocks.
For a long time, due to a combination of factors such as economic downturn, structural changes, monetary policy, investor structure, and stock market regulatory policies, A shares have formed a unique set of global stock market valuation systems that determine the level of valuation of a stock regardless of the performance, but based on the size of the plate. Under this distorted valuation system, large-scale bank stocks rising from 5-6 PE, 0.8 PB to 20-30% are considered to be a huge risk, absolutely impossible to hit, and the concept of eight hundred times smaller PE, tens of times smaller PE, falls from 30 to 50% are considered to be a serious overfall, and the investment value is huge.
In addition, other common factors contributing to the split include: institutions with long-term low blue-chip funding, small and medium-sized enterprises with over-subsidized funding, A-shares joining MSCI, pension fund listings, limited share sale, etc.
In summary, this twenty-eight turn, is the economic cycle, monetary cycle, regulatory cycle three simultaneous turn, the combined effect of the result of the restructuring of the A-share valuation system, even if one of the three occurred trend reversal generated by the industry in annual terms, let alone the three simultaneous turn. Three simultaneous turn, plus twenty-eight still different valuation levels, determined that this twenty-eight segmented blue chip stock market is just the beginning, the time lasts at least three years, eventually it is inevitable that blue chip stocks from general undervaluation to the formation of a super bubble in the end.
Until now, most of the participants in the A-share market have been obsessed with the A-share market atmosphere, which has been formed over the past decades, and have not been aware that the above three cycles have been quietly reversed. They do not understand why such a serious dichotomy has occurred, so they can only use the conspiracy theory to explain the changes in the market as a shield for the national team to succeed in the IPO, to strengthen the index, to create false prosperity.
Translated from Snowball