A-shares fell, and JPMorgan Chase was not a scapegoat

Pihai Chau

2024-06-28 06:30Creator in the field of finance and economics

In the past month or so, A-shares have come out of a continuous downward trend. The Shanghai Composite Index fell from a high of 3,174.27 points on May 20 to a low of 2,933.33 points on June 26, effectively breaking through 3,000 points again. A large number of individual stocks are even below the share price of 2635.09 points on February 5.

What triggered the resurgence of A-shares? Especially the A-share market lost 3,000 points again a few days ago, what is the reason for this? Judging by the news, JPMorgan Chase seems to have become a scapegoat. Because of the recent "small essay" that JPMorgan Chase is bearish on the Chinese stock market, it is rumored that JPMorgan Chase predicts that the Shanghai Composite Index may fall to 2398 points within the year. In this way, the main culprit of the recent decline in A-shares, especially the A-share fall below 3,000 points, lies in JPMorgan Chase's "small composition" of bearishness on China's stock market.

However, JPMorgan Chase does not carry this pot. On June 25, JPMorgan Chase said in an "verification" interview with a reporter that it had never published a relevant research report. J.P. Morgan's chief Asia and China equity strategist Liu Mingdi said that J.P. Morgan publishes research reports on the Chinese stock market forecast for the second year at the end of October and early November each year, and only forecasts the CSI 300 Index and the MSCI China Index. According to JPMorgan's forecast, by the end of 2024, the CSI 300 is expected to be 3,900 points in the basic scenario, 3,500 points in the prudent expectation and 4,200 points in the optimistic forecast. The closing point of the CSI 300 on June 24 was 3476.81 points, which is already a prudent position predicted by JPMorgan Chase. This also means that the CSI 300 has nothing to fall in, and the CSI 300 only has room to rise, but no room to fall.

Judging from JPMorgan's forecast for the CSI 300 Index, JPMorgan Chase is still cautiously optimistic about the A-share market. Therefore, the responsibility for the decline of A-shares is thrown on the head of JPMorgan Chase, and of course JPMorgan Chase does not carry this pot. In fact, JPMorgan Chase is indeed not a scapegoat for the decline in A-shares. Not to mention that JPMorgan Chase did not publish a bearish research report on China's stock market, even if JPMorgan Chase did publish a similar report, JPMorgan Chase is still not a scapegoat for the decline in A-shares.

It is undeniable that JPMorgan Chase is an influential investment institution in the world, but the trend of a country's stock market is obviously not determined by the words of one or a few investment institutions. There are intrinsic reasons for the rise or fall of a stock market. If the decline of a stock market is actually caused by an institution's short selling, it can only show that the stock market is too fragile, and it is so fragile that it can't help but be weak. But in reality, no stock market will be like this, and no institution will have such influence. For example, the U.S. stock market has been bullish for 15 years, and in the past 15 years, countless institutions and media have been shorting the U.S. stock market. If institutions can sing the stock market down, the great bull market in the US stock market died more than a decade ago.

A-shares are not comparable with the United States, but the trend of A-shares is also not that some institutions can sing short if they want to, and they can sing long if they want to. For example, in the past ten years, with the bullish trend of the U.S. stock market, the voice of singing long A shares has also been endless, but A shares have never come out of the bull market because of these long voices, on the contrary, they have been hovering around 3,000 points for more than ten years. Now, how can it fall because of an institution's short selling? And if A-shares are really strong, how can they be afraid of institutional investors? In this regard, the U.S. stock market has already set an example, so if A-shares fall and A-shares fall below 3,000 points, there is no need to use JPMorgan Chase as a scapegoat. This scapegoat hunt is irresponsible to the market and irresponsible to investors. Because this scapegoating only obscures the real reason for the fall in the stock market.

So, what is the reason for the decline in A-shares this round? To sum up, there are several main points. First, investors have turned from hope to disappointment, and investors' confidence in the market has further lacked. With the inauguration of Wu Qing, the new chairman of the China Securities Regulatory Commission, in early February, investors were full of hope, and Wu Qing has indeed done a lot of positive work since taking office, improving the current stock market system in many aspects. In fact, it is precisely based on the improvement of a number of systems that it has also revealed that the management's revision of the system has not touched the fundamental problems of the stock market.

For example, improving the IPO system has not improved the share capital structure of IPO companies, and it is still a dominant share, and the stock market is still an ATM for shareholders of restricted shares, and the threshold for IPO is still a bit low. For another example, improving the shareholder reduction system only further standardizes the shareholding reduction behavior of shareholders, but it cannot change the situation of shareholders standardizing the reduction of shareholdings, and the stock market still has to face the situation of shareholders of listed companies continuously reducing their holdings. Another example is to further strengthen the delisting work, but the issue of compensation to investors in the process of delisting has not been resolved, so that delisting has become a damage to the interests of investors. Therefore, some of the current revisions to the stock market system are actually incomplete, and none of the substantive issues involved have yet to be resolved. Investors will inevitably be disappointed.

Second, the short-selling tool is hanging high, further shaking investors' confidence in the stock market. The most obvious are refinancing securities and quantitative trading, which are the two major tools for institutional shorting in the market. Especially in the case of a downturn in the stock market, these two short-selling tools are extremely lethal. Small and medium-sized investors have been calling for a halt, but the relevant authorities have retained these two short-selling tools for the benefit of institutional investors.

Third, IPOs have fully recovered. Although the management did not completely suspend IPOs this year, due to the revision of the IPO system, the acceptance and review of IPOs have entered a substantial pause, and the issuance of IPOs is basically equivalent to a state of stagnation. However, with the release of the new IPO policy, IPO trials began to resume on May 16, and by June 21, the three major exchanges fully resumed IPO acceptance and review. Against the backdrop of A-shares struggling on the edge of 3,000 points, this is a further blow to the bulls. As a result, the market will associate itself with an acceleration in the subsequent issuance of new shares. The stock market 3,000 points is therefore self-defeating.

Fourth, the equalization fund as a stable stock market has not been formed. Although the management has always emphasized the need to prevent abnormal fluctuations in the stock market, it is impossible to prevent abnormal fluctuations in the stock market without the participation of funds. Although there are occasional national team funds such as Huijin to maintain stability in the guise of "mysterious funds", such "mysterious funds" have limited significance for maintaining stability, and they cannot greatly boost the stock market. As a result, the market has been unable to wait for the equalization fund to enter the market, and the stock market funds have further dried up, and more investors have chosen to withdraw from the wait-and-see.

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