Yang Delong: The main reason for the heavy fall in U.S. technology stocks and the bubble caused by the excessive rise is the main reason

(The author of this article is Yang Delong, Chief Economist of Qianhai Open Source Fund)

On United States the one hand, the technology leaders represented by Nvidia have risen sharply, bringing a strong wealth effect and attracting global capital to chase after it. But on the other hand, technology stocks have shown signs of weakness after three consecutive years of gains, and there is no market that only rises and falls, and there is no market that only falls and does not rise. The sharp rise in United States technology stocks has led to this round of bull market in US stocks, and in fact, many non-technology stocks in US stocks not only did not rise, but also fell. In other words, this round of bull market in U.S. stocks is actually a bull market in U.S. technology stocks, and the excessive rise in technology stocks is the most fundamental reason for the sharp decline in U.S. stocks overnight.

The second is that the financial reports of technology stocks in the second quarter have been announced one after another, and the profits and income of leading technology companies are less than expected. In addition, the stock prices of several leading technology companies in United States have fallen, among which the chip and semiconductor sectors have led the decline. The bull market in U.S. technology stocks is mainly driven by expectations, as many investors have high expectations for United States technology innovation and the empowerment of traditional industries by technology stocks. However, in terms of performance, these technology stocks cannot support the stock price to reach new highs, so we see that the bull market in US technology stocks actually has a signal of peaking, and I have also warned you about the related risks.

In fact, Buffett disclosed at the Berkshire Hathaway shareholder meeting held during May Day this year that in recent quarters, although US stocks have continued to hit new highs, Buffett's Berkshire Hathaway has been reducing its holdings, about $20 billion per quarter, and recently disclosed the reduction of its holdings in United States banks. This is also in line with Warren Buffett's consistent habit of reducing holdings when the market continues to hit new highs, and now Berkshire Hathaway's cash on the books has reached about $200 billion by the end of the second quarter. When there is a panic in the market, Buffett may be on a dip. There is undoubtedly a certain bubble now, so this decline is characterized by the decline led by technology stocks. The risk of U.S. stocks peaking and falling in the future is increasing, but the impact on A-shares and Hong Kong stocks is not particularly large. Because in the past three years, the differentiation between A-shares, Hong Kong stocks and European and American stock markets has been relatively severe, and when the European and American stock markets have bubbles, A-shares and Hong Kong stocks are in the process of squeezing bubbles, and their valuations are also in the valuation depression of the world's major capital markets. The stock markets of Europe, the United States and Japan have peaked and fallen, but it is likely that some international capital will flow out of these bubble markets to find new valuation depressions, and some of them will flow into high-quality assets of A-shares and Hong Kong stocks, thus playing a role in stabilizing the market. The peak and decline of US stocks has a relatively large impact on European stocks and Japan stock markets.

The Third Plenary Session of the 20th CPC Central Committee was successfully concluded, and on July 18, the "Decision of the Central Committee of the Communist Party of China on Further Deepening Reform and Promoting Chinese-style Modernization" was officially issued, and the "Decision" made important arrangements for the economic development of the mainland in the future of 5~10 years or even longer. The "Decision" emphasizes focusing on building a high-level socialist market economic system, giving full play to the decisive role of the market in the allocation of resources, giving better play to the role of the government, and adhering to and improving the basic socialist economic system. The "Decision" also proposes to prevent risks, strengthen supervision, and promote the healthy and stable development of the capital market. Since the promulgation of the new "National Nine Articles", the China Securities Regulatory Commission has successively introduced more than 40 supporting system rules, forming a "1+N" series of supporting systems. We will continue to strengthen supervision, including strengthening the supervision of the whole chain of listed companies, consolidating the "gatekeeper" responsibilities of intermediaries, strengthening the monitoring and supervision of the trading behavior of key investors, and severely cracking down on fraudulent issuance, financial fraud, insider trading, market manipulation and other violations of laws and regulations in accordance with the law. To continue to strengthen supervision, it is necessary to crack down on behaviors that harm the interests of investors through the supervision of market entities before, during and after the event, so as to create an open, fair and just "three public" market environment.

The "Opinions on Further Improving the Comprehensive Punishment and Prevention of Financial Fraud in the Capital Market" clearly stipulates that the "gatekeeper" responsibility of intermediaries is severely punished for financial fraud and that intermediaries bear important responsibilities and play an important role in maintaining the health of the capital market. In particular, intermediaries such as underwriters should consolidate their responsibilities and check the source to prevent listed companies from committing financial fraud. Auditors, accountants and other intermediaries should also fulfill their responsibilities, once they find that the listed company has financial fraud, they should stop it in time, feedback to the relevant competent departments, and assume relevant responsibilities and obligations, which can play a supervisory role. In the next step, we must take more measures to ensure the high-quality development of the capital market and achieve steady and long-term development. First of all, we must strictly control the quality at the source, and take responsibility for the declaration. It is necessary to strictly control the companies to be listed on the stock market, and some companies that do not meet the listing conditions must not be allowed to fish in troubled waters.

Checking at the source is the first step, and the second is to strictly supervise listed companies, and punish them in a timely manner once violations of laws and regulations are discovered. For some companies that have violated the new rules on delisting, they must be cleared out of the market in a timely manner. Recently, there has been the first case of delisting of companies with market capitalization, and according to the current regulations, if the market value is less than 300 million for 20 trading days, it will be forced to delist. In the future, the standard will be further revised to be delisted if the market value is less than 500 million, so as to truly form an environment of survival of the fittest. In addition, the requirement that the stock price will be delisted if it is less than the par value of one yuan will allow the capital market to truly achieve the survival of the fittest. Through the registration system, some scientific and technological innovation enterprises can land in the capital market and obtain valuable capital. On the other hand, through the strict implementation of the new delisting rules, companies that no longer meet the listing conditions will be delisted in a timely manner. Moreover, it is necessary to establish a compensation mechanism for investors, and delisting cannot be withdrawn as soon as it is withdrawn, and behaviors that harm the interests of investors must be punished in a timely manner.

At present, the mainland economy has begun to recover to a certain extent, but the recovery is not strong, and many industries have contracted, especially the consumption growth is low. Therefore, it is crucial to stimulate domestic demand and boost consumption in the next step. At present, under the situation of declining growth rate of private investment, government investment should be intensified. Due to the financial pressure of many local governments, the central government should do more infrastructure construction by issuing ultra-long-term treasury bonds, and at the same time provide financial support to local governments.

More importantly, it is necessary to boost consumption and raise the income level of residents. On the one hand, it is necessary to introduce more industry-specific supportive policies to encourage all kinds of market entities to be self-reliant, especially to support the development of the private economy. Private enterprises create 60% of GDP and 80% of employment, encourage the development of all walks of life, and support the development of private enterprises can create more jobs, improve residents' income expectations, and increase residents' labor income. On the other hand, it is necessary to take measures to stabilize the property market, boost the stock market, increase the property income of residents, and produce a wealth effect. Only in this way can we fundamentally increase our consumption capacity, because consumption is never stimulated but increased by raising residents' wage income and property income. Therefore, the policy of stabilizing growth in the future should be further strengthened and targeted.

At present, the mainland capital market has undergone continuous adjustment, and the Shanghai Composite Index once fell below the 2900-point index mark, at this time, it is difficult to reverse the decline by relying on the market's own strength, so I have repeatedly called on the national team to increase its efforts to enter the market, not only to support the bottom 3000 points, but also to further increase by about 20%, forming a bull market trend, and completely reversing the pessimistic expectations of the market. On the other hand, it is recommended that the national team should not only increase its holdings of large-cap index ETFs such as CSI 300, but also increase its holdings of small- and medium-cap index ETFs such as CSI 500, CSI 1000, and ChiNext Index, because now the large-cap stock index has not fallen much, but many small- and medium-cap stocks have fallen greatly, and even formed a certain siphon effect, which makes small and medium-cap stocks lose too much blood. Now to boost investor confidence, it is necessary to take into account all kinds of large, medium and small cap indices when bailing out the market, so as to boost investor confidence and reverse the pessimistic expectations of the market. From an investment point of view, investment is an investment crisis, especially when the market is in an extreme downturn, and it is often a good time to enter the market. The excess return of value investment often comes from the reverse layout, so at this time, it is also recommended that the majority of investors maintain confidence, maintain patience, choose good companies, grow together with great enterprises, stay away from poor performance stocks and theme stocks, and wait patiently for the arrival of the market through the low-level layout of these good stocks and good funds, which is the best investment strategy at present.

(This article is the author's personal opinion only)