A shares, why the plunge?

After the Spring Festival started this week, our big a shares began to continue to perform “diving” action, especially the GEM index, is performing its “no rebound down” stunts…

It was the market declines on Thursday and Friday that were most difficult to understand.

On Wednesday evening, the central bank released financial data for January 2022:

Among them, the increase of social financing reached a record high of 6.17 trillion Yuan, higher than that in January 2020 and 2021. The growth of broad money M2 also reached a one-year high of 9.8%. RMB loans increased by 3.98 trillion Yuan, the highest statistical value in a single month, an increase of 394.4 billion Yuan year-on-year

The above data means that in the past month, the central mother in order to save the economy really is to fight the life of the “flood irrigation”……

Did not expect, in the past such a tried-and-true big move, but this time actually is not useful, Thursday and Friday two days, the market seems to be completely unconvinced, with the CSI 300 index as the representative of large cap stocks and the CSI 500 as the representative of small and medium cap stocks, still continued to fall.

Come to think of it, during the Spring Festival of 2021, I wrote an article to remind everyone that the big a shares had reached the end of their rise:

“Stock market, what if it goes wrong?”

However, after the Chinese New Year plunge in 2021, the A-share market is once again in slow upward mode (for the centennial celebration, according to many), and some are cheering the return of the bull market. I have deliberately posted another article to tell you that the A-share market has not fallen far enough.

“Is this the end of the downward trend since Chinese New Year?

Just a day after Centennial Day, I wrote again to remind everyone:

“A shares, owe the market a big drop”

In early December 2021, after several months of adjustment, the valuation of A-shares was reduced. Many people asked me whether it was time to buy stocks. At that time, I wrote two articles to discuss this issue:

“The higher the price, the cheaper, the A-share can still buy?”

“When will the bottom of the market come?”

That’s all I’ve written about the A-share position for the whole of 2021.

In early December 2021, “The bottom of the market, when will it come In this article, I analyzed the relationship among the policy bottom, market bottom and economic bottom of big A shares, and emphasized as follows:

“It’s very uncertain how long after a policy bottom happens, so in that respect it’s really impossible to tell whether it’s a market bottom or not — at this point, if the market can have a real big sell-off that lasts for a couple of months, it’s pretty much a market bottom.”


In the past two months, shares have experienced continuous decline, now, I can roughly judge:

The bottom of the big a shares, either has appeared, or has been extremely close!

To clarify this question, we need to consider why the stock market continues to fall recently, even the extreme good news such as Tina social finance, cannot stimulate its rise?

Why? In fact, I gave the answer in my last post before the Spring Festival:

“The bond is broken!”

In the article “The Cycle of Mincing Gann and Group Gann”, I purposely wrote this:

“Enter to 2021, the so-called” leading “, “blue chip”, “white horse”, “science and innovation concept stocks”, etc., has been generally more expensive than small and medium cap stocks, to this time, there are “traitors” appear, they began to explore those in the value of the depressed cycle stocks, small and medium cap stocks, thus promoting more and more funds began to enter this track, Coupled with the commodities rally in 2021, resource stocks and quality small and mid-cap stocks have been in vogue, and diversification has become popular.”

“No matter what kind of group, the funds will definitely push the price of the group or the industry to the extreme, so that the stock/industry is no longer safe. Then, the smart fund will act as the first traitor, the group collapse, resulting in a sharp drop in the price of the stock/industry.

Because the prices of these stocks have been pushed to the extreme, the loss of the minimum margin of safety, when the overall collapse of the force appears, who runs slowly, who is still hesitant, will become the most blood, no matter how strong the national policy support willingness, no matter how loose the credit environment, cannot prevent those who used to group fund managers strong selling…

In the past 2019, 2020 and 2021, it is precisely these group stocks that have raised the most. They have become a significant force in the value of our Big A stock market. When these group stocks fall, even though many other stocks are rising, they still cannot offset the falling force.

This, I am afraid, is the truth of the recent decline in shares.

Many people may have noticed that in the current round of A-share decline since the end of 2021, “old economy stocks” such as financial stocks, oil stocks, resource stocks and steel stocks, which were originally abandoned by funds, actually did not fall much, while the stocks of companies that belong to the “stable growth” type supported by government policies even rose recently.

(Note: We’ll post a list of the top “steady growth” stocks, as summarized by other agencies, in the little red circle.)

If you have to go further —

Why do I judge that shares are now either at the bottom or very close to the bottom?

This is because the collapse of the group must be something that happens in the short term. When the collapse is near its end, it is basically the bottom of the stock market. Moreover, the money will eventually find its way into the stock market in the face of the flood of central banks and easy credit.

The only uncertainty is whether the current breakdown is nearing an end.

More importantly, under the circumstance that we know that the central government will continue to increase its efforts to release water, as I put it in the article “The Reincarnation of Full Stockholders and group Stockholders”, when the old group Stockholders collapse, a new round of group Stockholders speculation will be set off, which means the beginning of a new round of stock market rise.

Otherwise, should the fund managers, who have billions and billions of dollars in their hands, all return the money to investors and then buy nothing and accept the dilution of their wealth by printing money?

Of course, in addition to considering whether the current A-shares are the bottom from the perspective of game, in the next article, I will judge whether we have reached the bottom from the perspective of historical valuation and liquidity analysis.



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