Today's market held the 3200 point defense line and the volume shrank again. What does this trend indicate?
There are many interesting news in the world. For example, the relationship between Israel and France is tense, France calls for an arms embargo on Israel, and Jews are scolding French President Macron all over the Internet. These contents could have become a wonderful article.
However, France was the first to vote in favor of imposing tariffs on Chinese electric vehicles, which led to China quickly imposing temporary tariffs on French brandy. This is also an interesting story and could have made for another great report.
Although France is so strong that it seems to have become the third pole of the world, it may poke Britain and the United States today and China and Russia tomorrow, but I do not intend to discuss France today because there is something more noteworthy - the phenomenon that investors are concentrated in being bearish today.
Most of the stock bloggers on Douyin who were bullish a few days ago have turned bearish today, and their attitudes are clear. The situation is similar on WeChat public accounts. The stock groups that were very lively a few days ago are basically quiet today. If you have a Douyin account and WeChat public account, have followed stock bloggers, and joined a few stock groups, you can see the situation today by just swiping your phone.
These bloggers published titles such as (Cleared today), (Short bull is dead), (Dream shattered A shares), etc. Various so-called "stock experts" have doubted the bull market, and even made completely different statements from last week, which is erratic and confusing.
What's more, ordinary stock investors are also bearish and depressed. This phenomenon is very interesting, because although it is rare for investors to be bullish before the National Day, such intensive bearish sentiment today is even rarer. However, the former is supported by national policies, while the latter is just a spontaneous behavior of ordinary shareholders.
Yesterday, someone left a message asking me what I think about the intensive announcements of share reduction by hundreds of listed companies. He thought that if all listed companies were reducing their holdings, how could it be a bull market? In this regard, I have two questions: First, at what point did these listed companies intensively release announcements of share reduction? Second, where did you get this information?
Regarding the first point, most of these hundreds of listed companies announced their reduction during the seven-day National Day holiday, and a small number of them announced it three days before the National Day. The announcement was made after the company's senior management worked overtime during the holiday to study and approve it, which shows their determination and urgency in reducing their holdings.
Regarding the second point, the information about these reductions is not secret, but is widely disseminated through the media, who are afraid that the public will not know about it. Therefore, there is no need to dig deeper into this information, as it is already obvious.
If this is the case, what else is there to analyze? Anyone with a discerning eye can see the reason behind it. There is no need to ask further questions, and there is no value in further analysis. For those who really don't understand and still insist on asking questions, I can only elaborate on two points.
On September 26, the Central Political Bureau meeting had already set the tone to "work hard to boost the capital market", and all of China knew about it. A few companies that had already made plans to reduce their holdings issued announcements after the 27th, which can be understood as a coincidence. But hundreds of companies issued announcements of reductions in a concentrated manner in the spirit of the meeting. Isn't this normal? Do listed companies only care about money and ignore political factors?
What's more, before the National Day holiday, even the aunties at the vegetable market knew that the bull market was coming. Even if listed companies were in urgent need of funds, they would not choose to sell off at the lowest point, but wait for a more appropriate time. Over the years, these companies have been able to survive the fluctuations of the stock market. Why would they now sell off at a low point in spite of the spirit of the central meeting? This is simply against their own interests.
Even if the management of listed companies is not very sensitive to the financial market, the media should not report so intensively just before the market opens after the National Day. Media practitioners naturally understand the spirit of the central meeting. Why do they deliberately use such a headline? Don't they understand that the market before the National Day is too crazy and must be cooled down to avoid greater risks?
The media and policymakers have repeatedly expressed concerns about the consequences of a "mad cow" outbreak, especially those speculators who use online loans to rush into the stock market. They must be curbed in the budding stage, otherwise they will harm others and themselves, and even endanger the country. The stock market crash in 2015 was caused by these "madmen".
Therefore, the favorable policies that were supposed to be given after the National Day were cancelled, and various negative news quickly spread. The media repeatedly emphasized that we should not add fuel to the fire. Although it is difficult to grasp the strength of boosting market confidence, since the market is already overheated, we must not fuel the trend. This also explains why there are so many announcements of share reduction.
If you don't believe me, I can tell you clearly what will happen in the future. Starting tonight, the "reduction of holdings" announcements of listed companies will miraculously disappear. Even if some executives really want to reduce their holdings, the media will not report it. In addition, next week the media will intensively release good news, such as a bank's interest rate cut, the country's introduction of fiscal stimulus policies, and the central bank's promotion of the 800 billion yuan fund entry plan. These good news will appear one after another.
As for the future development, starting from tonight, we only need to watch the news for 7 consecutive days to understand the market trend. Because those bloggers were concentrated on bullish during the National Day, the policy side and the media side needed to cool down and balance. Today, the intensive bearishness of bloggers prompted the policy side and the media side to warm up and balance.
As a reminder, the 800 billion yuan of funds from the central bank have not yet been used, and the fastest-moving companies have just submitted their application forms. Therefore, although too many people are bearish on A-shares today, believing that this week's weekly line is a huge tombstone line, locking up trillions of funds, and that even if the central bank injects 800 billion yuan, it cannot be saved, these views rely too much on technical indicators and ignore the importance of national will.
Many Douyin bloggers shout about the will of the state, but their understanding is not deep enough. The will of the state is not simply favorable policies or 800 billion yuan of financial support, but the determination of the state to truly value the capital market and be willing to carry out a series of reforms and support for it. To understand this, we must understand the essential differences between the Chinese and American stock markets.
The strongest main force in this round of bull market is high-interest state-owned enterprise stocks, and the central bank's 800 billion yuan of funds will focus on these enterprises. For example, a giant insurance state-owned enterprise has an annual profit of 140 billion yuan, a dividend of 40 billion yuan, and a market value of only 1 trillion yuan; a giant bank state-owned enterprise has an annual profit of 200 billion yuan, a dividend of 70 billion yuan, and a market value of only 1.5 trillion yuan. Although these companies have high market values, they have generous dividends and very attractive dividend yields.
Take a giant state-owned insurance company as an example. If you spend 1 million to buy it, you can get 40,000 yuan in dividends next year. Even if the stock price fluctuates, the dividends from holding these stocks for many years will become a stable source of income. Even if the market value falls, as long as the dividends remain unchanged, it will still be attractive in the long run. This type of stock is currently at a low level, and the dividend rate still has room for improvement. Compared with bank deposits, the income is more advantageous.
As long as the country is determined to boost the capital market, these state-owned enterprise stocks alone can push the market to break through 5,000 points, which is why I am confident that the bull market will be successfully launched. But that's not all.
Dividends alone cannot sustain the market value and require the support of national will. Buybacks and cancellations are another effective way to increase the market value. Apple in the United States is a typical example. Apple's market value is as high as 3.47 trillion US dollars, but its dividend rate is only 0.98%, mainly relying on large-scale buybacks and cancellations to maintain a high market value.
Apple's financial statements show that in recent years, its dividends and repurchases have exceeded its net profit, and even loan dividends have occurred. In 2022, Apple chose to pay dividends of $14.8 billion and repurchase and write-off $90.2 billion, totaling $105 billion, exceeding its net profit attributable to the parent company of $99.8 billion. This high intensity of repurchase and write-offs supports its high market value, but also puts its net assets and cash flow under tremendous pressure.
What's more frightening is that Apple's revenue and profits stagnated in 2018, and stagnated again after a brief surge in 2021. With the rise of Huawei's domestic chips, Apple's market position is facing challenges. If Apple continues to repurchase and cancel its shares at a high intensity, and its revenue and profits cannot grow synchronously, its financial situation will be precarious.
Apple's example shows that buybacks and write-offs have a very strong effect on boosting stock prices. Even if a company's financial situation deteriorates, as long as it has sufficient cash flow and invests a large amount of money in buybacks and write-offs every year, it can maintain a high market value. This approach is feasible in the United States, but in China, if listed state-owned enterprises operate in this way, they may be able to launch a big bull market.
However, China's listed state-owned enterprises currently have abundant net profits, but lack the motivation to carry out such a large-scale repurchase and cancellation, unless the state explicitly requires it. If the state decides to adopt this strategy, the required funds can be fully realized by reducing holdings, without having to rely on dividends every year.
The state's will is not just a statement. If necessary, the state has the ability to organize listed state-owned enterprises to spend a certain percentage of their net profits on repurchase and cancellation each year to boost stock prices. This is why I emphasize the state's will. It is not a simple policy statement, but a manifestation of actual action.
Finally, here is an investment tip for everyone: when you have a strong urge to buy, consider selling; when you have a strong urge to sell, consider buying, or at least don't rush to sell. This strategy is particularly effective for investors with lower levels. If you can organize several investors with lower levels into a small group to trigger emotional resonance, the results will be more accurate. For most people, the applicability rate of this strategy is over 90%.
After looking at today's market, are you excited or pessimistic? Do you want to increase or reduce your position? Review your true psychology when looking at the market, and then do the opposite.
Next week should be a dull and boring trend with shrinking volume. However, now that so many people are intensively bearish in public opinion and the mood is low, the stock market will start with a positive line next week, followed by intensive release of good news, and the 3200-point defense line may be broken.
Do you believe it? Let's wait and see.
