How Does A Share Price Collapse?

The State Council supports the registration system in advance, and will adjust the relevant provisions in the securities law after being authorized. This means that the registration system will be implemented at the beginning of next year. Although the SFC has repeatedly issued the new stock issue rhythm and price will not let go of the four "no" interpretation, but the market for registration system is expected to launch the fear or even fear mentality still exists.

In the environment of rule of law, investor protection, delisting system and other related supporting systems, investors' worries are not without reason. But on the other hand, investors are probably more worried about the market's structural high valuation unsustainable or even avalanche, which is a distorted mentality created by the "value missing" market under the long term approval system. In my opinion, registration system is the key system to restore market ecology, create a market mechanism and prevent abnormal fluctuations in the market.

The Tsinghua research report blamed the stock market crash on five aspects: excessive leveraged transactions, uneven mechanism, new stock issuing system and serious retail business. But the author believes that the root cause of the stock market crash is the lack of A shares and the collapse of stock prices caused by structured high valuation.

In the bull market, a large number of small cap stocks and theme stocks, junk stocks were repeatedly stir fried, mixed insider trading and stock price manipulation "malicious do more" is the internal cause of share price avalanche. "Malicious short selling" is only the external cause and fuse leading to the stock market crash. The structural overestimation based on "malicious doing" is the main cause of the stock market crash.

The high valuation of Chuang Xiao board is rooted in the scarcity of quality stock resources under the approval system, and related stocks have gained a scarcity premium. Since the launch of the gem in 2009, only more than 400 companies have been listed on the market. Tens of thousands of SMEs are crying out for food. There are many high-quality companies in emerging industries. What is more, once the approval system is established, once the enterprise is established, list It is very difficult to withdraw from the market. These stocks have gained the advantageous conditions of the issuance and reorganization of mergers and acquisitions, so they will get the premium of shell resources and the expected premium of merger and acquisition.

Therefore, the approved A shares actually include Scarcity premium , shell resources premium, acquisition premium, and market share premium. If we add the temporary regulatory loopholes such as stock manipulation and insider trading in the transition period of the emerging market, the bull stocks and "monster stocks" under the guidance of illegal private placement will emerge one after another.

To break the price overvaluation caused by this multiple premium, registration system is the best prescription for the right remedy. However, it needs to be pointed out that after the introduction of the registration system, short-term shares will not expand in large scale, and the price and rhythm of IPO will not be released for a while. The high valuation of the market structure will continue.

Of course, punishing "malicious doing more" and fostering the formation mechanism of slow cattle is not to say that it is not allowed to do more. It should not tolerate stock price manipulators. We see that after being punished and decided by the exchange, A's share price has climbed steadily, and has hit a record high of 108 yuan. No performance of the "monster stocks" rampant, can only be foreshadowed for the plunge.

Hundredfold PE Gem And small cap stocks are also unbearable for the registration system. As of December 11th, China Securities Index Co announced the latest price earnings ratio of gem 103.47 times, and large batch of new shares exceeded the stock price level before the stock crash. Under such a high valuation, how does the registration system include the pricing of IPO and how to liberalize it? At present, IPO is dominated by small board and small cap stocks in Shanghai stock market, and its market pricing is bound to be in line with the two tier market. Without administrative control, the marketization of IPO pricing will probably repeat the "three high" failures of IPO. If too much administrative intervention is carried out in the long run, the pricing of new shares can not be released, and the registration system will be nominal. The structural high valuation of the market will bring the registration system into a dilemma and dilemma.