[Today's Guide]
○Unconventional measures to help market through crisis peak
○Insurance funds thinks time still needed for the forming of "market bottom"
○Panning in the slump, under-valuated blue-chips become popular
[XFA View]
Unconventional measures to help market through crisis peak...
------
A-share market plunged since mid-June. To prevent an explosion of systemic risk, under the coordination of authorities at higher level, ministries recently have introduced a succession of unconventional measures, attempting to avoid failure of the pricing, financing and resource allocation functions of the market by providing liquidity support and restricting capability of shorting via derivatives. It may take some time to see the effect, but it is confident that these measures will surely help the market through the worst of the crisis. As leverage has reduced remarkably, real valuable investment opportunities will gradually emerge.
Statistics show that SSE Composite Index，Shenzhen Component Index, SME board Index and ChiNext Index have tumbled 32 percent, 39 percent, 38 percent and 39 percent respectively since June 15. Without considering suspended stocks and new shares, four stocks, including Kairuide Holding Co., Ltd. (002072.SZ) and Jiangmen Sugarcane Chemical Factory (Group) Co., Ltd. (000576.SZ), dived over 70 percent, 357 stocks 60-70 percent and 520 stocks 50-60 percent. And nearly 70 percent of the stocks fell in half. Meanwhile, the government launched arrays of measures, including interest and targeted RRR cuts, liquidity support, restriction for shorting via stock index futures, to stabilize the market. But the effect is not significant.
Except that it takes time for the policies to take effect, the most important reason goes to that the A-share market is undergoing an unprecedented deleveraging progress now. According to the latest survey, the number of customers, whose positions under the warning line of margin trading and securities lending in one certain large securities brokerage, soared from single digital on June 15to triple digital snow, particularly with an increase at a geometric rate within the past two trading days. The asset scale of those who may suffer forced liquidation takes up over 35 percent of the total assets of margin trading. Besides, most of these customers are unable to make additional funds and sell their individual share due to the continuous plummet in stock price by the daily limit. Therefore, the market liquidity is nearly frozen and the market cannot get thrived by itself.
The regulators have realized the crux of the bailout plan. Seen from the market situation in these two days, the "national forces" began buying a large number of potential blue chips of financial industry and petrochemical industry, providing liquidity for the public and private investment institutes so as to reduce their stress in fund redemption and forced liquidation of small-cap stocks. Today they start providing liquidity for the small-cap stocks directly, reducing the stress in forced liquidation of margin trading and securities lending. Although this process will be very horrifying and may last for a period of time, it is believed that the margin trading will be downscaled significantly and the market will gradually get recovered and stabilized thanks to the liquidity injection by the central bank. It worth more anticipation that with the valuation bubble decreasing, there will be more stocks of companies with good performance and business structure worthy of value investors' purchasing.
[Institution's movement]
Insurance funds thinks time still needed for the forming of "market bottom"
------
The insurance funds in Beijing and Shanghai recently interviewed by XFA unanimously think that the clear vow of the central bank to provide unlimited liquidity support presently has eased the market's concern. The "national forces" that helps stabilize market also optimizes their bailout patterns and injects continuous liquidity flow into the popular stocks on the market. In the meantime, financial institutions including the insurance regulators and state-owned enterprises also hastily mobilize to boost the market in all-round manners. It's believed that with the various stabilizing measures taken in succession and the previous precipitate dip of stock index, the market bottom is being built, though time is still needed.
[XFA Viewpoint]
Panning in the slump, under-valuated blue-chips become popular
------
In the market slump of both valuable and valueless, it might exist the best opportunity for 'panning gold'. During the sharp drop since June 15, about 70 percent of companies listed in A-share market have suffered from over 50 percent of decline in share prices, with many suffering accidently injury. Valuations of many blue-chip companies greatly fell back. According to statistics of Shanghai Securities News, over 400 companies obtain rapid growth in net profit after deduction, obviously over the current expectation. There are 6 non-financial companies with PE ratio less than 20 or just in 20s based on the calculation on estimated performance of first half year by the lower limiting, and with continuous growth during last 3 years, which are Chongqing Changan Automobile Co., Ltd (000625.SZ), Sichuan Chuantou Energy Co., Ltd. (600674.SH), Qianyuan Power (002039.SZ), Xinjiang Goldwind Sci ＆ Tech Co., Ltd (002202.SZ), Qifeng New Material (002521.SZ) and Stanley (002588.SZ). And the actual controller of Stanley increased the shareholding of 10,000 shares in Stanley on July 3, and 100,000 shares on July 6.
Additionally, according to statistics of Shanghai Securities News, the non-financial companies with PE ratio less than 10 after deduction include Huadian Power International Corporation Limited (600027.SH), Changchun FAWAY Automobile Components Co., Ltd (600742.SH), Poly Real Estate Group Co., Ltd (600048.SH), Changyuan (000966.SZ), Gree Electric Appliances, Inc. of Zhuhai (000651.SZ) and etc.
○Unconventional measures to help market through crisis peak
○Insurance funds thinks time still needed for the forming of "market bottom"
○Panning in the slump, under-valuated blue-chips become popular
[XFA View]
Unconventional measures to help market through crisis peak...
------
A-share market plunged since mid-June. To prevent an explosion of systemic risk, under the coordination of authorities at higher level, ministries recently have introduced a succession of unconventional measures, attempting to avoid failure of the pricing, financing and resource allocation functions of the market by providing liquidity support and restricting capability of shorting via derivatives. It may take some time to see the effect, but it is confident that these measures will surely help the market through the worst of the crisis. As leverage has reduced remarkably, real valuable investment opportunities will gradually emerge.
Statistics show that SSE Composite Index，Shenzhen Component Index, SME board Index and ChiNext Index have tumbled 32 percent, 39 percent, 38 percent and 39 percent respectively since June 15. Without considering suspended stocks and new shares, four stocks, including Kairuide Holding Co., Ltd. (002072.SZ) and Jiangmen Sugarcane Chemical Factory (Group) Co., Ltd. (000576.SZ), dived over 70 percent, 357 stocks 60-70 percent and 520 stocks 50-60 percent. And nearly 70 percent of the stocks fell in half. Meanwhile, the government launched arrays of measures, including interest and targeted RRR cuts, liquidity support, restriction for shorting via stock index futures, to stabilize the market. But the effect is not significant.
Except that it takes time for the policies to take effect, the most important reason goes to that the A-share market is undergoing an unprecedented deleveraging progress now. According to the latest survey, the number of customers, whose positions under the warning line of margin trading and securities lending in one certain large securities brokerage, soared from single digital on June 15to triple digital snow, particularly with an increase at a geometric rate within the past two trading days. The asset scale of those who may suffer forced liquidation takes up over 35 percent of the total assets of margin trading. Besides, most of these customers are unable to make additional funds and sell their individual share due to the continuous plummet in stock price by the daily limit. Therefore, the market liquidity is nearly frozen and the market cannot get thrived by itself.
The regulators have realized the crux of the bailout plan. Seen from the market situation in these two days, the "national forces" began buying a large number of potential blue chips of financial industry and petrochemical industry, providing liquidity for the public and private investment institutes so as to reduce their stress in fund redemption and forced liquidation of small-cap stocks. Today they start providing liquidity for the small-cap stocks directly, reducing the stress in forced liquidation of margin trading and securities lending. Although this process will be very horrifying and may last for a period of time, it is believed that the margin trading will be downscaled significantly and the market will gradually get recovered and stabilized thanks to the liquidity injection by the central bank. It worth more anticipation that with the valuation bubble decreasing, there will be more stocks of companies with good performance and business structure worthy of value investors' purchasing.
[Institution's movement]
Insurance funds thinks time still needed for the forming of "market bottom"
------
The insurance funds in Beijing and Shanghai recently interviewed by XFA unanimously think that the clear vow of the central bank to provide unlimited liquidity support presently has eased the market's concern. The "national forces" that helps stabilize market also optimizes their bailout patterns and injects continuous liquidity flow into the popular stocks on the market. In the meantime, financial institutions including the insurance regulators and state-owned enterprises also hastily mobilize to boost the market in all-round manners. It's believed that with the various stabilizing measures taken in succession and the previous precipitate dip of stock index, the market bottom is being built, though time is still needed.
[XFA Viewpoint]
Panning in the slump, under-valuated blue-chips become popular
------
In the market slump of both valuable and valueless, it might exist the best opportunity for 'panning gold'. During the sharp drop since June 15, about 70 percent of companies listed in A-share market have suffered from over 50 percent of decline in share prices, with many suffering accidently injury. Valuations of many blue-chip companies greatly fell back. According to statistics of Shanghai Securities News, over 400 companies obtain rapid growth in net profit after deduction, obviously over the current expectation. There are 6 non-financial companies with PE ratio less than 20 or just in 20s based on the calculation on estimated performance of first half year by the lower limiting, and with continuous growth during last 3 years, which are Chongqing Changan Automobile Co., Ltd (000625.SZ), Sichuan Chuantou Energy Co., Ltd. (600674.SH), Qianyuan Power (002039.SZ), Xinjiang Goldwind Sci ＆ Tech Co., Ltd (002202.SZ), Qifeng New Material (002521.SZ) and Stanley (002588.SZ). And the actual controller of Stanley increased the shareholding of 10,000 shares in Stanley on July 3, and 100,000 shares on July 6.
Additionally, according to statistics of Shanghai Securities News, the non-financial companies with PE ratio less than 10 after deduction include Huadian Power International Corporation Limited (600027.SH), Changchun FAWAY Automobile Components Co., Ltd (600742.SH), Poly Real Estate Group Co., Ltd (600048.SH), Changyuan (000966.SZ), Gree Electric Appliances, Inc. of Zhuhai (000651.SZ) and etc.
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