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    There is no logic according to Yan Yan’s investment in Li Jingwei’s “Reviving Cow” view

    2019-02-11 14:28:45

    Flat gold base

    According to the news from the "2019 Fudan Yanlan Global Investment Strategy Forum" held at Guanghua Building of Fudan University on January 23, the forum speakersDr. Li Jingwei's view on the operation of the capital market in 2019 is a rush to approve A-shares. In 2019, it will usher in the next three to five years., although Li Jingwei did not name it.CITIC SecuritiesHowever, everyone knows that although many market participants have predicted that 2019 will be a bull market at the end of 2018, and it is the starting point for the future of three older cattle, it is clear that CITIC Securities is the view of the revival of cattle in the next 3-5 years.

    CITIC Securities published a research report on November 13, 2018, stating that in 2019, A shares will usher in the starting point of revival of cattle in the next 3 to 5 years. And put forward three reasons: 1) changes in the new pattern between China and the United States: CITIC Securities believes that the cyclical correlation is weakened, and the policy adjustment is forced. Behind the "trade war" is the medium- and long-term competition between China and the United States for high-end manufacturing; it is expected that both sides will strengthen the regional industrial chain "holding a group" with a new round of bilateral/regional trade agreements. The cycle of Sino-US trade and investment is weakened, and short-term pressures and medium-term challenges coexist: China's accelerated reform and opening up is an inevitable choice, and traditional policy models must be adjusted;

    2) Adjustment of policy style: CITIC Securities believes that there will be a major switch in the future policy style, focusing on standard stocks to fostering increments, and breaking through structural bottlenecks with reforms to drive high-quality development. Finance, taxation, state-owned enterprises, and opening up are important points of view in 2019: tax cuts and fee reductions will be strengthened with the reform of the fiscal and taxation system in the medium-term trend; the reform of state-owned enterprises will enter a new phase of the bottom-up comprehensive pilot; manufacturing, finance, and service industries. The external access will continue to be relaxed, and the opening up will force the industrial advancement and upgrading;

    3) New economic cycle: structural adjustment is accelerating. The policy "rebalancing" the bottom economy, tax cuts + stable leverage + reforms to accelerate economic restructuring. Thus, the growth rate of the economy in 2019 will bottom out in Q2~Q3, and the A-share will also usher in the revival of cattle in the next 3~5 years after the risk is fully released.

    Li Jingwei believes that this view is basically self-talking.There is no factual and logical basis. The reason for this conclusion is that it is fundamentally lacking serious research and correct understanding of China's national conditions. It has not been seriously scrutinized in logic, and it is a bit of a mouthful of taste.

    Li Jingwei believes that the reason for the first Sino-US trade war proposed by CITIC Securities has overstated the impact of Sino-US trade war on China's economy, industrial structure, reform and opening up, and policy model. Li Jingwei believes that China's GDP is not dependent on foreign trade. Up to 34% (data for the first quarter of 2018), while the GDP created by foreign trade accounts for less than 20% of China's total GDP, and the Sino-US trade war is at best an international trade issue, and it is only China and the United States. The issue of import and export trade (the total trade volume between China and the United States accounts for only 13% of China’s total foreign trade), a trade issue, not to mention that the trade issue between China and the United States is far from enough for China’s economy and industrial structure. And reform and opening up even the policy model has such a big impact. In fact, China’s political and economic system must be decisive for China’s economy, industrial structure, reform and opening up, and policy implementation. Therefore, it is a bit of a mouthful for CITIC Securities to raise this reason.

    Li Jingwei believes that the second reason proposed by CITIC Securities is that they believe that there will be a major switch in the future policy style. The future policy focus will be from standard stocks to fostering increments, and reforms will break through structural bottlenecks, thus driving high-quality development. These arguments are unfounded, because whether the standard stock or the increment is not the government can do it, and the market players certainly have no will, and they will not be able to do such a global plan. It will only determine its own behavior according to market demand, and thus present a market state that is impossible at all and does not need to distinguish between stocks or increments.In fact, it is impossible to make a distinction between the standard stock and the cultivation increment. It is meaningless.And reforms may not be able to break through structural bottlenecks and promote high-quality development, because different reforms can bring different or even opposite results.Really comprehensive market-oriented reforms may indeed promote high-quality development, but it turns out that past reforms are not the direction of marketization.For example, for the reform of state-owned enterprises, people think that it is more market-oriented and more conducive to the direction of market vitality. However, what people see is the large-scale merger of state-owned enterprises and the strengthening of party control and leadership over state-owned enterprises.

    Therefore, reform is a very subjective concept. Its understanding and implementation are completely controlled by the implementer's ideology. People with different ideologies can completely explain the reform, and different so-called reforms will inevitably bring Come different or even the opposite result. andOpening up may not necessarily force reformBecause when it puts pressure on reforms, it may be abandoned by the implementers. Of course, it may eventually lead to the demise of the interest groups that resist the reform, but in any case, openness does not necessarily lead to the reforms needed for opening up. Tax cuts and reductions may have a certain mitigation effect on the downturn of the economy. However, due to the huge administrative system of the country, the tax cuts and reductions must be extremely limited and even increase. More importantly: the vitality of the economy actually depends on the vitality of the political and economic system. A country has the ownership and distribution rights of most resources and the political and economic system that has absolute strong intervention and administrative control over the market. It is impossible to lead to a dynamic and efficient economic system and capital market.

    Regarding the third reason, Li Jingwei believes that the new economic cycle is only the law of the market economy. For an economy dominated by administrative control, there is no economic cycle law in the market economy.

    All in all, Li Jingwei is negative about the bull market theory represented by CITIC Securities in the next three years.

    When talking about his own judgment on the 2019 A-share market, Li Jingwei said: fundamentals, valuation, liquidity, expectations and investor style are the five most important factors that affect the stock market's operation, and the fundamentals determine the stock market. Long-term operation trend and stock price volatility; the valuation determines the health of the stock market. If the valuation is too high, the stock price may fall at any time. The liquidity determines the real-time status of the stock market. It is the most direct factor determining the stock price. If the sex is not good, the stock market will be difficult to go up, the liquidity will be good, and the stock market will go up; the expectations and investor style will have an impact on the medium, long-term, short-term and instantaneous operation of the stock market. In terms of fundamentals, since China’s basic political and economic system and the highest-level national governance concept will not fundamentally change,The performance of monopoly state-owned listed companies will continue to improve in 2019, but its operating efficiency will continue to be low,Private listed companies will continue to struggleUnder the background that the central government can not truly implement the business environment of private enterprises, its fundamentals will further deteriorate, and the fundamentals of the entire economy will continue to deteriorate.

    In terms of valuation, although most of the stocks are now at historical lows, their historically low stock prices may not be valuation lows as their business conditions continue to deteriorate.

    In terms of liquidity, large-scale infrastructure construction will absorb most of the funds,The stock market will continue to be in a state of ischemia and blood lossIn the context of a serious lack of confidence, in addition to hot money, it is difficult to have large-scale external funds to enter the market, and may even increase the further flight of capital.

    On the expectation side, since investors' core confidence in the A-share market is derived from the confidence in the country's political development, if investors' confidence in the country's political development is insufficient, their bottom-level confidence in A-shares will inevitably be seriously insufficient. The power of strong power and its intervention will not change or even strengthen the background (although its time to act to alleviate the deterioration caused by it, but the strong intervention of the government on the market will inevitably create a bad market) As a result, the overall loss of investors will be even more devastating. In this context, investors will be more fearful and their confidence will drop to freezing point.

    Investors' investment style will be more cautious and fearful.

    The launch of the science and technology board that implements the registration system will lower the valuation of the A-shares as a whole and cause a further decline in the average amount of stock funds. The development direction of the A-share registration system and the increase in the registration system risk may further increase the confidence crisis of investors in investing in the Chinese stock market.

    In summary, all the important factors affecting the operation of the stock market are difficult to improve or even worse, therefore,The stock market in 2019 and even the next three years will continue to be in the channel of low volatility.At the same time, in the context of improper intervention by the supervisory authorities and increased distrust of the top of the national governance, the repeated shocks and plunging of the stock market are not ruled out, resulting in heavy losses for investors. In order to prevent investors from completely distrusting the supervisory authority and the ability and willingness to manage the top-level capital market, the supervisory authority may make some short-term policy choices to improve the market under the pressure of the top and market. This may be short-term for the market. The rebound has a partial effect, and this does not change the power of the supervisory authority to intervene in the market, and its forced to adopt a more market-oriented policy in the short term is another manifestation of its ability to intervene in the market arbitrarily. Xiao He, therefore, has not changed its power and nature based on its intervention in the market. Therefore, its future will inevitably repeatedly introduce policies or behaviors that counter the market harm to investors, so that the market will not change the long-term characteristics of its repeated shocks.

    [Li Jingwei's opinion on September 1, 2017]

    Don't be too happy, your entire income may be written off at any time.

    In the past two months, China's A-share major indexes have been rising all the way. In the past week, they have been continuously blushing. Most of the stocks have continued to rise. Many small and medium-sized investors have made some small profits. So everyone started to smile and the stock market commentators are also full of glory. It is full of hope, and it is expected that the future index will go up to a few points. However, Yan Yan’s investment wants to remind investors that it’s still good to be optimistic about your money bag. Don’t be too happy, don’t be too radical, otherwise maybe some of your previous income will be written off, and even the old ones will be Go in! (Source: Yan Yan Financial Research Institute)

    About the author: Ph.D. in Economics, Fudan University, Founding Partner of Yanqi Investment Holding Group, and Deputy Director of China Venture Capital Research Center, Fudan University.

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