The Son of Finance of the Great Age

  Chapter 950 Adding fuel to the fire

  Under the coordination of the leaders, several departments immediately took action, and within a few days relevant rectification measures were issued to all banks and securities firms.

  On January 27, some banks reduced the leverage ratio of umbrella trusts, and the stock market fell 0.89% to close at 3352 points that day.

   On January 28, the capital market supervision department strictly investigated the financing and financing business of small and medium-sized securities companies. This news once again hit the enthusiasm of the market. The stock market fell 47 points that day, or 1.41%.

On February 6, the regulatory authorities officially issued a decision to prohibit securities companies from selling umbrella trusts. This news once again poured cold water on OTC funds, causing the stock market to plummet by 5% at the opening of the day, and eventually fell by more than 7% throughout the day. The index also fell to 3049 points, the lowest figure this year.

   It can be said that in the past two weeks, the continuous measures of the management have sent a strong signal to the market, that is, to continuously cool down the current frenzied stock market and to rectify the market by cracking down on the leverage ratio.

This approach was also clearly captured by the market. The frenzy of capital allocation was brought under control to a certain extent, and the stock market also entered a period of adjustment in the following month. There was no frenzied rise or inexplicable decline. It seems that the regulation and control has been successful during this period.

  But on March 12, a month later, the situation changed again. This time, the stock market was like a wild horse running wild, and it was out of control.

  A shocking news came out of the market that day, which directly ignited the enthusiasm of investors.

   It was also because of the incident seven years ago, when the Chinese government at that time decided to implement a large-scale economic stimulus plan of 4 trillion yuan nationwide in response to the global economic crisis. However, this is only the central government's economic stimulus plan, and various local governments have also introduced their own economic stimulus plans one after another. Taken together, the entire China's economic stimulus plan has reached an astonishing ten trillion yuan.

  Although the economic growth rate has been successfully avoided, as time goes by, this part of the debt has gradually become a major concern for various local governments. Because according to their current fiscal revenue, it is far from possible to repay the principal of these debts.

  In this case, the central government has to join the ranks of solving these local debts. There are currently several theories circulating in the market, including methods such as extension, replacement, and debt-to-equity swap.

  The extension is the simplest in terms of procedure, that is, to extend the time limit for repayment of these debts when they are due, and to pay part of the overdue funds at the same time. But this has a disadvantage, that is, the original investors will lose confidence in the repayment of these debts, and then sell this part of the bonds at a low price in the market, which is very likely to cause the collapse of the entire bond market.

  Debt replacement is to replace the old bond with a new bond, and use the new funds raised to repay the principal and interest of the previous debt. In this way, it will not cause the fact of default, but also win more time for the debtor. And most importantly, as the inflation rate increases, this part of the debt is actually getting smaller and smaller. Therefore, the market generally believes that the central government will eventually take such measures to solve the debt problem of local governments.

  The last type of debt-to-equity swap is to convert the debt in the hands of the creditor into shares according to a certain ratio. Because local governments issue debt through their state-owned assets, if debt-to-equity swaps are implemented, some of their state-owned assets will be converted into private properties. The disadvantage of this approach is that, first of all, it is difficult for the debtor and the creditor to reach an agreement on valuation, and the transfer of state-owned assets is likely to cause social criticism.

  Comparing the three treatment methods comprehensively, the market unanimously believes that the debt replacement method will eventually be selected to deal with the local debt problem.

  This creates another problem. Through debt replacement, this is almost equivalent to putting trillions of funds into the market at one time, which can be called a large-scale QE operation.

  And to a certain extent, QE is definitely good news for the capital market.

  In addition to the explosive news of local debt replacement, there is another piece of news that excited the market. A vice chairman of the capital market supervision department said on this day that the supervision department is cooperating with global institutions and strives to include China's capital market in the MSCI index as soon as possible.

  MSCI, Morgan Stanley International Capital Corporation, is a world-renowned index compilation company. Their index is the most widely used fund index in the global portfolio economy. The global assets of more than 10 trillion US dollars are based on MSCI's index, and more than 97% of the world's asset management adopts this index. It can be said bluntly that this index is a barometer of global assets.

  The difference from other indexes is that once a certain market is included in the MSCI index, MSCI will invest in the purchase of related stocks and directly participate in this market. As far as the current market value of China's stock market is concerned, even if it wants to track the situation of the top three companies in the industry, MSCI may have to spend tens of billions of funds to buy related stocks. And if it wants to fully reflect the situation of China's capital market, MSCI may have to pay at least hundreds of billions of RMB.

   This news also means that Huaxia's capital market still has at least 100 billion level of capital waiting to enter.

  These two pieces of news were released in one day, which immediately detonated the entire market.

  The stock market rose 0.7% at the opening, and rose 1.72% throughout the day, closing at 3349 points.

  The most important thing is that after more than a month of entanglement, the index finally broke through the pressure line of 3300 in one fell swoop, and rose as much as 49 points in one day.

  More stock critics commented after the market that the market will soar after breaking through 3300, and the bull market 2.0 will start again.

   Sure enough, after the conflict at 3300, the market seemed to have no more pressure, and there was a positive line for eight consecutive days, which directly pushed the index up to 3687 points before there was a certain correction.

  In just eight trading days, the entire market rose by nearly 10%, and the strong performance stunned the entire market.

   It is necessary to know that the performance of this index is the performance of those stocks included in the index. These stocks are either heavyweight stocks or blue chip stocks, and the general stock price fluctuations will not be very violent. But in the past eight trading days, these heavyweight stocks and blue chip stocks have collectively risen by nearly 10%, which can be seen how those stocks with smaller market capitalization will react.

  The stock price-earnings ratio of the small sector has been collectively pushed up to nearly 100 times, which means that it will take at least 100 years for the earnings per share to recover the cost of the stock price. This is just the average figure of hundreds of stocks, among which the rate of return is as high as 150 to 300 times.

   It is important to know that the average life expectancy of Huaxia enterprises is only 7 years.

What's even more absurd is that some new stocks have continued to rise after their listing, from a few yuan at the opening to several hundred yuan, and these companies have reached dozens, and some of them even made profits. They haven't done it, and they can't even calculate the price-earnings ratio.

  The market is crazy. Traditional financial statistics can no longer reflect the real value of stocks. The price-earnings ratio is also called the market dream ratio, which represents a flashy and exaggerated dream.

   But all this has not yet reached a climax. After a brief adjustment, on March 30 the stock market once again blew the rallying call for an upward attack.

The news of the day mainly focused on a few news. The two national land and housing construction departments jointly issued a document to standardize the use of land across the country, optimize the housing supply structure, increase the supply of affordable housing in the market, and make full use of the laws of the market to provide supply of construction.

Naturally, this piece of news has undoubtedly caused the rise of the entire real estate sector in the market. Although the content of this document does not constitute a positive for the real estate sector, under the crazy market, as long as there is news from any industry, Funds will swarm in, directly stimulating the rise of the sector.

  Another piece of news is about the pharmaceutical sector. The Ministry of Science and Technology has decided to implement a strategic plan for precision medicine, and will invest 60 billion to 100 billion in the plan in the future.

   Regardless of whether the company is eligible to participate in this strategic plan, in short, the entire pharmaceutical sector has also taken off. Funds from the market poured in desperately, and soon the stock prices of various pharmaceutical companies skyrocketed.

   At the same time, the release of a piece of news about Internet finance also stimulated the rise in the stock prices of banks, brokerages, and Internet companies.

  Accompanied by these releases is another piece of news that does not sound so good. Statistics from the Bureau of Statistics show that in the past January and February, the total profits of industrial enterprises across the country have declined by 4.2%. Among them, the profit decline of mining and energy-related enterprises is particularly obvious.

  Obviously this is not good news, the economic rise is being hindered. But ironically, in addition to the slight decline in the stock prices of energy companies, the entire market once again experienced a strong rise throughout the day. It opened 19 points higher in early trading, and rose 95 points throughout the day, an increase of 2.59%.

On April 16, this crazy rise hit a new high again. Because of the launch of two new stock index futures that day, the entire market directly opened 1.45% higher that day, and the 61-point high opening rate hit the highest in history. It rose by 2.2% all day, and it rose by as much as 300 points directly from the lowest point of the previous day, reaching a shocking 4287 points.

  By April 27, the crazy market finally reached a climax. On that day, because of the central bank’s reverse repurchase, the market once again rose by 3.04%, and the index reached 4527 points, setting a new high in seven years.

  Although the market interprets the central bank’s reverse repurchase behavior as a disguised RRR cut, few people have noticed the difference between the two. Investors are reveling, and they are looking forward to the moment when the index breaks through 5,000 points.

  After the government decisively implemented measures to cool down the stock market, the market surged 50% again in just two months.

   Thanks to the book friends for a light ray of moonlight, the wind waiting for the mooring, Xiao Shuili, crab reading, and alex0007 for voting monthly! I sincerely hope that more book friends can support this book. The achievement of this book depends on everyone's joint efforts. Thank you very much~

  (end of this chapter)