A-Share Market Soars on Blockbuster News; Speculation on Earnings Bombs, Restructuring Hype Needs Cooling

Originally, A-shares were bound to fall today, with the market opening low and diving, and both ChiNext and STAR Market experiencing significant declines. However, around 10 a.m., a piece of news emerged, causing the market to quickly strengthen, and the Shanghai Composite Index also turned positive. At the close, the Shanghai Composite Index rose by 0.68%, and the total turnover of the two markets increased to 1.9 trillion yuan, with more than 4,200 stocks rising.

Many people might be confused by this news, or even not have paid attention to it, wondering why it had such a significant impact, directly pulling A-shares into the red. Let me organize this for everyone to understand.

Do you remember the Ministry of Finance's press conference on October 12th? At that time, the Ministry of Finance mentioned that it would introduce the most significant debt reduction measures this year, but it did not specify how much debt would be issued. This is because the issuance of debt must be determined through the legal procedures of the National People's Congress (NPC), and the Ministry of Finance does not have that authority.

The market has been closely watching the scale of debt issuance. Originally, the NPC was scheduled to meet at the end of the month, but last Friday it was confirmed to be changed to November 4th to 8th.

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The news mentioned that the package of incremental policies is quite large, and the specific arrangements are expected to be announced through legal procedures in November. The official statement that the scale is quite large must mean it is not small (which is a tautology), and it can be considered as a strong stimulant for the market. Then, the legal procedures mentioned in November should refer to the NPC.

Another detail is quite important. This news was spread during the China-U.S. Economic Working Group meeting, not directly reported domestically, but rather "exported and then re-imported." Moreover, the reporting outlet was only the new media channel of China National Radio, possibly to manage expectations in case the market is disappointed.

In fact, as I reminded last week, the external market environment is deteriorating. The U.S. ten-year bond yield once broke through 4.3%, and the U.S. dollar index broke through the 104 mark. This week, the U.S. will release its third-quarter GDP data, as well as employment data and unemployment rates for October. If the data continues to be strong, the Federal Reserve may not cut interest rates, which would be unfavorable for emerging markets such as A-shares and Hong Kong stocks.

From the market perspective, export-related sectors are performing poorly, especially NV chain stocks like InnoLight and New Easy. Domestic demand-related sectors are strong, such as real estate, building materials, liquor, and maternal and infant products. Although there may not be substantial impacts, they are likely to be at high levels, and institutions like to gamble, which can lead to a more volatile market. If you have seen my reminder, the day New Easy releases its performance is a good point to cash out.What are the consequences of reorganization themes?

Due to the high fermentation of reorganization, A-shares have fully engaged in the game of group reorganization concept stocks, and most of these reorganization concept stocks are performance bomb stocks and micro-cap stocks. Therefore, a phenomenon has emerged in A-shares, that is, poor-performing stocks have significantly outperformed high-performing stocks, with 20cm and 30cm stocks being pursued by funds, while 10cm stocks are relatively cold.

This year, micro-cap stocks have plummeted three times. The first time was during the liquidity crisis in January, when micro-cap stocks were halved in a few trades. The second time was when the "Nine National Articles" were introduced, and the third time was when the new delisting rules were introduced. At that time, many stock investors who liked to speculate on themes were crying from the drop.

However, even after experiencing three painful lessons within a year, it still cannot stop everyone from speculating on junk stocks and micro-cap stocks. The lesson that people can learn from history is that people cannot learn lessons from history, and human greed is fully reflected.

In the final analysis, thematic stocks are a game of pass-the-parcel, where the latter pay for the former. Reorganization is the same. If listed companies are in such a state, how many excellent ones are there among those that have not been listed? In 2015, the media sector was also speculatively merged and reorganized. If you look at the K-line yourself, you will see that it goes up and down in the same way. How many can really come out?

Mergers and reorganizations need to pay attention to market risks and compliance control. If this kind of speculative frenzy continues, I believe that regulation will sooner or later take action. At that time, it may be a collective limit down, and you can't run away.

It is not difficult to achieve phased benefits in a bull market, but why is it still one profit, two flat, and seven losses? Because most people cannot take away the benefits, and most of them are like fetching water with a bamboo basket. I'm not saying that you can't do themes, but at least when various reorganizations are widely spread in various groups, and everyone knows, isn't the sentiment too hot, and isn't it necessary to pay attention to risks?

To be honest, don't blame A-shares and listed companies for being bad if you lose money in the future. Aren't they all individual choices? It's unreasonable not to reduce holdings when others' stock prices are driven so high. Stock investors are all great benefactors, enriching the main force and enriching shareholders. In the end, whose pockets are being emptied?