Starting from June 6, 2005, China's stock market entered the second wave of a dramatic bull market with a cycle of more than 8 years. Its time span is so long and the space amplitude is so large that it is not ordinary people can imagine. Specific space points I do not speculate, but can be illustrated, has passed the 3000 points is only basic, 4000 points is sure to be stepped on the foot, 8 years after the final arrival of the space point is how much, I can not predict, I believe that no one can also accurately predict. From June 6, 2005 to February 16, 2007, the time span is about 1.5 years, the rise is 200%. In such a short period of time, this range can not be said to be large, but its nature I categorized as a recovery rise, why, we can carefully review the market situation in the past 1.5 years.
Phase 1: The bear market is finished, and the stock market is trying to rebound slowly (June 2005 to November 2005)
This stage is characterized by the bear market has ended, but people are still not willing to believe that the fragile psychology of the ravaged bull market has come, if there is a rise, still regarded as a rebound in the bear market, everything is hesitant, careful, for fear of disturbing the sleeping bear brother. Only a very few prophets bravely buy, because this time the stock, too cheap, really too cheap, gold everywhere ah, may not have the same opportunity in ten years ....... This stage of the slow rise, a rapid decline, but then can not fall below the previous bottom, grinding ah grinding ah, finally grinding off those who are not determined, and then to the second stage ...
The second stage: the big dream (November 2005 ~ May 2006)
The second stage is characterized by pulling up the cost of getting out of the valuation is too low unreasonable area. This stage is nothing, is to understand the reasoning of more and more people, skeptical people less and less, we all know the opportunity to quickly get a say, in the second stage of the end of the market, that is, in early May 2006, the formation of a small wave of madness, followed by a larger adjustment ...
The third stage: the first signs of greatness (August 2006 to (February 2007)
May to August 2006, after a thorough cleansing of the second phase, the stock indexes from August 2006 onwards, into the years of showing great promise. From August onwards, in the elephant stock's strong pull up, the stock index strong into the main rising wave, this stage, the bull is not back to eat grass time, pull up and pull up, the people are crazy. The business department is full of people, new stockholders account a new high. At this stage, as long as you buy stocks, just how to make money, the stock index rose like a mad dog, so called mad dog wave. However, how powerful force can not make the stock index forever up and not rest, the bull will always turn back to eat grass. In January 30, 2007 to February 6 this period of time, the bull bowed, the market plunged nearly 500 points in 6 days. The crash brought about by the upsurge of the plunge so that many people can not afford, but also gave investors a vivid lesson, the stock market is risky, enter the market need to be cautious.
One and a half years, although the market has gone through several phases, but in terms of the general trend, the stock index in the year of the fire dog basically belongs to the unilateral rise, investors have much to gain. Although the stock index has risen very high, but the trend has not changed, the stock index's successive record highs opened up the space of the bull market, enhanced investor confidence, attracted a large amount of incremental capital, for the next stage of the evolution of the market laid the foundation and paved the way for the conditions.
2. The stock market in 2007, the possible fluctuations
2007 for the index of unfavorable factors:
1). Price-earnings ratio is too high: the average price-earnings ratio of the stock market has risen from about 15 times a year and a half ago to nearly 40 times now, no matter from what point of view, this data "at this stage" is too high, from the point of view of sustainable development, it is no way to go on. China is in the rapid development of emerging markets, and the rapid development of macroeconomic fundamentals to support, coupled with the appreciation of the yuan factor, the price-earnings ratio can be appropriately overestimated, can be acceptable long-term average price-earnings ratio fluctuation value can be considered in the 20 times to 25 times (Europe and the United States, Hong Kong, is 15 times), at most, can not be detached from the long-term 30 times. So, high P/E ratio is a problem.
2). Too much short-term profit-taking: 1.5 years stock index from 1,000 to 3,000 points, the return on capital in this market is too high, basically profiteering. General capital annual return of 15% on a lot of people happy, now this market capital annual return of more than 50% abound, not very normal. History tells us that the market will not let you so comfortable to make money, the market will certainly use his own way for investors to raise the cost.
3). The market into the theme of the stock stage: the general bull market plate speculation are roughly the pattern, at first value investment, and then spread to speculation in the second line of blue chip stocks, and then speculation in the plate with substantial subject matter, and finally entered the stage of speculation in the garbage subject matter. Now this market is basically carried out to the stage of crazy speculation of the subject matter, regardless of whether the news is true or false, the first speculation. Roughly browse through the individual stocks, each stock has basically experienced a soaring section, and then how much room to rise. These indicate that the market is gradually entering the end of the period.
4). From the wave theory point of view, from February 6, 2007 the beginning of the upward section, very much like a slightly larger level of the wave of the 5 wave, 5 wave after what is, is corresponding to a larger level of the wave of the adjustment wave.
5). From Gann's time cycle to measure, 2007 Spring Festival after 3 to 5 weeks, is its dangerous time window, is the major time cycle of major fluctuations and minor fluctuations in the secondary time cycle of the overlap point. It is even more dangerous if it rushes higher during this time, which indicates that the time cycle point will fall at the apex of the space, a signal that a decline is inevitable.
Overall, the broader stock index of the rising force is gradually weakening, the time of the rise is gradually shortened, the time and space of the decline in the increase, the decline of the driving structure of the one time than the previous strong. The SSE index may be between 3100 and 3500 points, the time after the Spring Festival in 3 to 5 weeks to see the first high after the Spring Festival in 2007, and then a large level of adjustment, the adjustment of the first point of reference is the last plunge in the low point of 2541 points.
At the same time, to state a point, what is the purpose of the technical adjustment, is for the next time better rise. In a technical adjustment, you can wait for the price-earnings ratio to gradually keep up with the rise in the stock price, forming a fundamental support for the stock price. At the same time also in order to raise the cost of investors, digestion of profit-taking. It is also often said that time for space.
*Three, grasp the trend*
1, the interest rate hike can not change the trend of the bull trend
The People's Bank of China decided, since March 18, 2007 onwards, to increase the financial institutions of the RMB deposit and loan benchmark interest rates. Financial institutions one-year deposit benchmark interest rate by 0.27 percentage points, from the current 2.52% to 2.79%; one-year loan benchmark interest rate by 0.27 percentage points, from the current 6.12% to 6.39%; other grades of deposit and loan benchmark interest rates are also adjusted accordingly.
Interest rate hike on the stock market is undoubtedly a negative, the stock market will indeed have a certain degree of impact, but the impact of this interest rate hike on the stock market is not so large as to change the pattern of the current round of the bull trend. Therefore, the fund long-term investors operating ideas there is no need to adjust with the interest rate hike.
The impact of previous interest rate hikes on the stock market:
The first interest rate hike: May 15, 1993
The People's Bank of China decided to raise the RMB deposit and lending interest rates, the average annual interest rate for all grades of time deposits increased by 2.18 percentage points, and the average interest rate for all loans was increased by 0.82 percentage points. The rate hike made the Shanghai index fall 27.43 points on the first trading day.
Second interest rate hike: July 11, 1993
The central bank raised interest rates again, with the one-year time deposit rate rising from 9.18 percent on May 15, 1993, to 10.98 percent, an increase of 19.61 percent. It fell 23.05 points on the first trading day.
The two rate hikes in 1993 caused the Shanghai Composite Index to fall 44.2 percent from 1,392 points to 777 points rapidly in the following three months.
Third rate hike: Oct. 29, 2004
The one-year deposit and lending rates were both raised by 0.27 percent. Is on the way down the Shanghai Composite Index plunged 1.58%, closing at 1320 points on the same day, and then after a few trading days of consolidation, although there is a wave of small rebound, but ultimately still unable to get rid of the downtrend, the Shanghai Composite Index fell below 1,000 points on June 6, 2005, hitting a new low of 998 points for many years.
Fourth interest rate hike: March 17, 2005
The central bank decided to raise interest rates on housing loans. This meant a 5 to 10 percent increase in the burden of paying home loans for the vast majority of people who bought homes for self-occupation. The Shanghai Composite Index fell 0.96 percent that day and another 1.29 percent the next day. After a slight rebound, the Shanghai Composite fell all the way down to as low as 998.23.
The fifth interest rate hike: April 28, 2006
April 28, 2006, financial institutions loan interest rates rose by 0.27 percentage points, from the current 5.58% to 5.85%. 28, the Shanghai Composite Index opened 14 points lower, the highest 1445, closed at 1440, up 23 points, a surge of 1.66 percent. Subsequently still maintain the upward momentum, and in May launched a wave of history of rare forcing the market, to July 5, 2006, the highest touch to 1757 points.
In 1993-1998, the U.S. experienced several interest rate hikes, but the U.S. stock market rose from 3,520 points all the way to 8,300 points, or as much as 136 percent, out of the grown-up 5-year bull market.
In summary, in the first four interest rate hikes, due to real estate and other dominant relatively large, affected by the impact is also relatively large, will inevitably have a great impact on the broader market, at the same time the stock market has not been reformed, Industrial and Commercial Bank of China, the Bank of China and other large-capitalization has not yet been introduced. But now in addition to changes in market capitalization, the key is that investors have gradually adapted to the interest rate hike. From last year's interest rate hike, the stock market has undergone a fundamental change, interest rate hikes are no longer poison, but rather a good medicine to promote the healthy development of the stock market. Some people do not understand the true meaning of the interest rate hike as well as the use, will only blindly follow the wind and kill the fall, in fact, the major market has always plummeted the culprits are largely to blame for the panic panics, so the investor's mindset is the key.
2, the day of the launch of stock index futures is the A-share deep adjustment of the time
The world since there is no feast, there is no all the way to the bull market. People are concerned about when the stock market adjustment? When to end? This is to start with the engine of the bull market. For the atypical nature of China's bull market, I have been thinking about it since 2003, so I deliberately worked overtime on May 19, 2003 to write "the typical beginning of an atypical bull market", which was published on the front page of China Securities Journal. In my opinion, the engine of China's bull market has always been the government in the past, and there is no bull market if the government doesn't pay out money, which is often referred to as the "policy market". High economic growth will inevitably generate the demand for securitization, so the stock market dynamics ahead of the response to economic trends, which is the so-called "barometer" mechanism. But China's rapid economic growth is not only not accompanied by a corresponding rise in the stock market, but also accompanied by a five-year bear market, which has been plagued by investors in the Chinese securities market. In fact, the reason is very simple, is a driver and engine problem. China's stock market this car is built by the government, the government as a driver, with an old diesel engine. Investors do not driver, would not think to change the engine, just want to "ride", do not want to drive, so the government get off the car, no one drove the first half of 2004, this round of the bull market started back when the driver of the government would like to make this car factory, but did not think that no one behind the hand, the driver get off the car, car The driver got out of the car and the car "stalled". So the stock market in 2004 was like an airplane taking off and then making an emergency landing, and the management started to look for a new driver and launched the equity separation reform. The equity distribution reform solved two problems: the first is to solve the "driver" team problem, the second is to solve the problem of the stock market engine. Institutional investors entered the market with three motives: the first one is to securitize China's economic growth and then profit from the securitization process; the second one is to create a new game in the stock market and then profit from big mergers and acquisitions; and the third one is to turn the enterprises into commodities and then profit from the market of manufacturing "enterprise commodities". The third motivation is to turn corporations into commodities and then profit in the markets that create "corporate commodities". Behind the full circulation market is the commoditization of enterprises, behind the commoditization of enterprises is the securitization of finance, and behind the securitization of finance is the industrialization of the securities market. All three are indispensable, forming the basis of the current round of the bull market, so in this year to let China's "invisible bull market" surfaced.
The difference between behavioral and theoretical economics is like the difference between Catholicism and Christianity. Smith's market definition as the Catholic God, in the Meiji space above the unattainable, Nash equilibrium market definition of God pulled down the altar, into the game of buyers and sellers. So in the behavioral economics of the market, the driver can be changed, the behavior also changes. When the driver changes from the government to an institutional investor, the new driver has to change the engine, and the rules of the game in the market change. Because when the government is the driver, the first principle of the stock market is stability; in the era of institutional drivers, the origin of the stock market is volatility. The cause of fluctuations sometimes from the buyer, sometimes from the seller, just like the trajectory of the car, the trend lies in the direction of the road, fluctuations in the driver's driving. From this principle to analyze the market trend, the stock market adjustment occurs at the point and depth will depend mainly on the behavior of investment institutions. Some institutions predict that next year is "the beginning of the rise, the middle of the year adjustment, the end of the year back up", but to specifically analyze the engine of the current round of the bull market, will find that the stock market adjustment greater probability will occur at the beginning of the year, or more precisely, will occur in the launch of stock index futures.
I define one of the driving forces of this bull market as the "immigrant effect", which is driven by the over-the-counter (OTC) investment institutions as "new immigrants" to the stock market. It turns out that the new immigrants in the OTC are institutions, many of which are overseas institutions or fund managers trained by overseas institutions. Institutional investors have a professional habit, that is, every time out of the quarterly annual report, will be "window dressing (Window Dressing)", so that investors, bosses or shareholders to appreciate their foresight. So the closer the bull market gets to the end of the year, the higher it will go, as fund managers are chasing the bull to cover their positions. China's stock market has been the highest rising stock market in the world this year, and if any fund manager hasn't used up his own available China investment quota by the end of the year, and doesn't hold the highest rising Chinese blue chips this year, he's saying you haven't been watching the market. Because of this pressure, everyone will use up their quota before the end of the year, and so it happens that the better the blue chips go up, the more bullish the stock market becomes.
The conclusion of such a mechanism is that every year after the end of the year there will be institutions first push up the market, waiting for the opportunity to sell, "decorate the window" work is completed, there is no need to continue to "decorate", this professional habit will cause the market to a slight This professional habit will cause a small market adjustment, if the market has hedging investment instruments, there will be a more substantial correction, because institutions can first layout in the derivative market, and then start selling. Such a hedging transaction will enable the losses incurred by the fund in the positive equity position adjustment to be hedged by the gains in the derivatives market, thus not leading to a significant drop in the net value of the fund in the process of the fund's position adjustment. So in addition to the fundamentals, from the behavioral side of the stock market adjustment to add a point of caution: small adjustments to see the "window"; large adjustments to see the "position".
This mechanism tells us that the adjustment after "decorating the window" is mostly a minor adjustment. However, after the launch of stock index futures, because institutions can use derivatives products to hedge the loss of positive stocks, there may be a larger correction. A larger correction has a dual effect, one of which is for institutions to adjust their positions. In the process of adjusting positions, because there are derivatives investment gains to hedge losses, the net book value change will not be very large, but the available cash has increased. The second is the retail investor "shock position". When the correction exceeds a certain point, retail investors will become birds of a feather. So when retail investors follow the trend of selling, and create opportunities for institutions. So, institutional selling plus derivatives hedging will create new investment opportunities in the market.
The game of institutions and retail investors is an eternal theme, everyone will say to protect investors, but to protect which kind of investors? Is the institution or retail investors? And each have an account. The protection of retail investors can only be in the system, procedures, and information disclosure to complete the general commitment, and the market is basically a new product for institutional investors. Therefore, in the process of market and product innovation, the protection of investors naturally favors the protection of institutional investors. The opening up of the derivatives market and the introduction of stock index futures are in fact mainly for the protection of institutional investors to provide new hedging tools.
So I think that early next year there may be "window-dressing" after a small adjustment. However, after the launch of stock index futures, the market may see a deep adjustment. Adjustment in the bull market as long as it does not fall below the psychological line of 20%, the tone of the bull market still exists, the institutions will continue to launch a new round of rally, which is my view of next year's stock market adjustment mechanism.
China's stock market changed the driver, the new driver changed the engine, the market from the fundamentals and policy aspects of the new "gas pedal":
The first is the appreciation of the yuan. This year rose 3%, experts predict that next year's rate of increase will be more than 5%, so the appreciation of the yuan is expected to promote the stock market to continue to improve;
The second is the company's earnings. It is expected that next year's company profits will significantly exceed expectations, which is the intrinsic motivation of the securitization of China's economic growth, is a fundamental factor;
The third is the return of the "invisible earnings". When management's interests and stock prices are disconnected, the operating cash flow of a listed company often has three outlets: one outlet goes to the head office; one outlet goes to affiliated companies; and one outlet goes to the listed company. As a result, the management of the listed company has to consider profit diversion while making money, and balance the different interests of the three pockets through profit diversion. The big pocket is usually the major shareholders, the interests of the major shareholders and the management of the listed company's hat are linked together. The small pocket is for the management and related organizations, the cash flow of the small pocket relates to the indirect interests of the management and related organizations, and also relates to whether the listed company can sustain profitability. So only after both ends are taken care of does the rest flow into the listed company's pocket. When such a mechanism existed, a considerable portion of the actual profit generated by the listed company would flow out of the listed company. However, after the reform of equity distribution, there are three factors that will change the above mechanism: one is the management equity incentives that will be launched next year, the pilot program will start next year, and the management of listed companies is preparing for the accumulation of distributable profits; and the second is the improvement of the level of corporate governance and transparency. As a result of strong investment institutions into the market, institutional people do not participate in the management, but supervision and management of the function of strengthening the three pockets will not be so easy to casually transfer; the third is the new accounting standards and new assessment methods, the market value of the assessment will gradually replace the original net worth assessment, the new accounting system and the new assessment methods will also make the cash flow back to the A shares, exceeding the expected profits will lead to a further increase in share prices
Fourth
Fourth is the reform of the tax system. Tax reform is already on the agenda, and the "two taxes in one" will solve a major problem in China's corporate system. Back then, in order to open up to the outside world, we implemented a favorable tax policy for three-funded (wholly foreign-owned, Sino-foreign joint venture, and Sino-foreign cooperative) enterprises. In addition to the "two exemptions and three reductions or three exemptions and five reductions", foreign investors actually enjoyed a lot of preferential treatment, and their actual tax payments were on average only about half of those of domestic enterprises. The unification of the two taxes, as well as the inclusion of the tax cuts following the unification of the two taxes, is estimated to lower the new flat tax rate by about one quarter, which means that the reform of the tax system will increase the profits of listed companies by 8 to 10 percent on the original profit level, which will directly affect China's A-share market, which is currently still dominated by domestically owned state-owned enterprises, and it will also provide incentives for foreign investors to participate in China's listed companies, and will promote the A-share market's It will also provide incentives for foreign investors to invest in Chinese listed companies and promote the diversification of the A-share market.
Fifth is the opening up of the securities market, the opening up of the A-share market is also a game between the state and multinational corporations, the result is to exclude foreign small and medium-sized enterprises in China's market. QFII policy or other policies to open up the policy of foreign institutional investors, are in the world's top rankings of the influence of the big banks to formulate. Taking QFII as an example, there is not a single company in Hong Kong and Taiwan that is qualified to apply for QFII quota. Large multinational financial institutions control China's opening to the outside world, and this situation will improve next year. I expect that next year, the QFII application threshold will be lowered, the financial market will be further opened up, and may even be those through the import and export quotes to sneak into the Chinese market of hot money "to abandon the darkness of the light" into a new institutional investors.
The sixth is the standardization of institutional investment. At present, in addition to the fund company, the general business if the investment in stocks as one of the main business, it is best to use the "head account" for investment. Because the legal person's investment and a natural person's investment, in addition to the advantages of the legal person to assume limited liability, the legal person's return on investment to bear the multi-layer tax. China's current tax system actually discourages institutions from investing in securities. Many organizations hide behind natural persons to invest, on the one hand, for the sake of invisibility, and on the other hand, for the sake of tax evasion. The taxation of institutional investment income not only plagues the standardization of institutional investment, but also hinders the issuance and trading of innovative products such as asset securitization and REITs.
The seventh is the integration of A+H. With more and more blue chips listed and H-shares "returning home", the A + H model will gradually lead to the integration of the A-share market and the Hong Kong market, which in turn raises the question of the exit of the B-share market from the stage of history. the closure of the B-share market should be based on the experience of the equity distribution reform, through the agreement to repurchase, privatization of the delisting, or quasi-QFII way to solve, thus strengthening the A-share market, and thus strengthening the A-share market. The B-share market should be closed through buybacks, privatized delisting, or quasi-QFII, thus strengthening the integration between A-shares and H-shares.
Overall, from the macro, micro, domestic, international, tax reform and enterprise system reform and other factors, next year, China's stock market continues to improve the basis is very strong, this year's savings growth rate fell for the first time is just the beginning of the beginning of large-scale capital investment in the stock market. Savings as water storage, investment as a flood, from the system to open the savings funds automatically flow into the securities market change has just begun.
3, grasp the trend
For the determination of the trend of a variety of methods, you can use the Dow theory, you can use the wave theory, you can use the averaging theory, and can be as simple as a straightedge to the chart. And for how to grasp the trend, so that the trend for their own use, is to see the wisdom of each of the wonderful way. In fact, the trend is scary simple, simple enough to be described as follows: long market in the long, short market in the short. It's easy to say, but it's really hard to do. This is not to blame yourself or others, in fact, this is determined by human nature. Many of the weaknesses of human nature is from the innate, such as fear, laziness, impulsiveness, greed, etc., while many of the good qualities need to rely on the cultivation and experience, and therefore also caused people to know and do can not be unified. When people read stock reviews, stock commentators will generally say bearish and bearish reasons, and pointed out the future support or resistance, but also very kindly recommended in the support of the low suction to grab rebound, in the resistance to reduce the pound. These gentlemen are courageous, but we cannot agree with their approach. If you suck low to grab a rebound in a short market, I am afraid you will drown in a downward waterfall; if you go short in a long market, I am afraid you will step on a helicopter. Trends are invincible. Can the resistance support during these trend movements fight the trend? Trend is so simple, you only need to have simple thinking will have simple action, and in this market, often simple action but subject to the least resistance. In terms of the market, the deep fall brewing rebound; rise more brewing fall. But how many people can catch this pole? There is a saying that as long as there are people in the market to fight the trend, then the trend will not end. In the trend process, and how many "dare to be the first" of the "smart people" by the market mercilessly eliminated ah. The trend can be recognized. The reason why there are so many people lose money, one is from the human nature of the problem, that is, know the direction of the trend, but because of greed and fear, etc., or think they are smarter than the market, and unknowingly chose to fight against the trend; the second is do not know what is the trend, completely based on the feeling in the market walk. Therefore, such as the trend is clear, such as the disk is hot, such as you know understand, you want to not make money are difficult, then do not late ah. The important thing is that you should be outside the game when you are confused, not in it. You can't gamble with your own money in your own confusion. It is useless to be smart, the key is to be a moneymaker.