Over the weekend just passed, the news from domestic and international fronts was mixed, with significant disagreements. The main positives were concentrated domestically, focusing on policy measures to stabilize the economy and the rising expectations for a rebound in Q4 GDP; whereas the overseas news was almost entirely bearish, with the proposal to significantly extend U.S. stock market trading hours potentially increasing the risk of capital flight by foreign investors!
It is precisely because of the severe disagreements in the news that the direction of the A-share market today is crucial!
Regarding the impact of extending U.S. stock market trading hours, there is a wide divergence of opinions among different investors. In the comments section of articles, some friends, seeing this relatively rare bearish news, may experience increased panic; while more composed friends believe that the extension of U.S. trading hours has little to do with us and will not affect the trend of the A-share market.
It is still difficult to draw conclusions about the impact of this matter. By inferring behavior from its purpose, it is thought that extending U.S. stock market trading hours may only be the first step. If the desired effect is not achieved, other strategies may be introduced.
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What everyone wants to know now is whether these external factors will change the pace of China's economic recovery in the fourth quarter and the trend of the A-share market?
If your focus is solely on bearish news and you are dominated by a bearish mindset, you are likely to believe that the rebound trend of A-shares will be shaken next! To more accurately judge the future trend of the A-share market, we need to consider a combination of news, fundamentals, capital, and technical analysis!
Take the extension of U.S. stock market trading hours, for example. Its impact on A-shares is only on the capital front, potentially exacerbating the risk of capital flight by foreign investors! However, among the forces driving A-shares higher, foreign capital is only a relatively small part. We can look at the following two sets of data:
1. As of the end of Q3 this year, the total market value of shares held by northbound capital is around 2.41 trillion, which is only 2% of the total market value of A-shares, which is 88.76 trillion.
2. The recently disclosed Q3 report data from public funds shows that Central Huijin's increase in positions in Q3 reached 300 billion; the first phase of the central bank's swap facility for the stock market is as high as 500 billion! Meanwhile, northbound capital has a total purchase of 2.41 trillion over the years.
A simple comparison reveals that northbound capital's share of the total market value of A-shares is not too large. The driving force behind A-shares is still dominated by domestic capital. Moreover, even if U.S. trading hours are extended, it is not possible for all foreign capital to flee collectively. Therefore, although this matter has a certain impact on the capital side of the A-share market, it is not enough to change the overall structure of the market's bullish and bearish forces!In these two scenarios, the first one carries a greater hidden risk, and most of the companies that have recently announced merger and acquisition plans fall into this category. Some investors might not understand why there would be risks involved when a listed company spends money to acquire assets to strengthen its main business. To put it bluntly, the assets of a listed company belong to all shareholders, while the decision to merge and acquire is made by a minority of shareholders. So, how much money is spent and what kind of assets are bought, and what the future profitability will be like? Perhaps only the company's top management knows the inside story, and it's hard for us ordinary retail investors to know the ins and outs!
When regulatory policies are strict, the risk of covert benefit transfer is smaller; when policies give the green light, such risks naturally become greater!
Of course, this is to tell everyone that the risk of this kind is greater than usual, and it's hard for us ordinary retail investors to identify. So when you can't recognize the opportunities or risks involved, the best approach is to wait and see, not to earn money beyond your own cognition.
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