Stock Market: A Wave of Positive News is Coming!

　　The Chinese stock market after the Dragon Boat Festival has been full of twists and turns.

　　The stock market first experienced a five-day consecutive decline, making you not even want to look at the market, but the stock index "learned from shame and became brave"; on June 11, the stock market surged, allowing the Shanghai Composite Index to firmly stand above the annual line again, and the market's morale returned!

　　After the rise on June 11, the market clearly entered a phase of volatile consolidation, with individual stock performances becoming prominent.

　　In the short term, the A-share market will still experience fluctuations, but it seems that the current A-share market has already entered a period for strategic allocation.

　　Of course, judging the future trend of the stock market solely based on the recent days' performance would be too superficial. We will consider it from the following three aspects.

　　01 New measures to drive the economy

　　New measure 1: "New regulations on special bonds" issued

　　On June 10, the "Notice on Properly Carrying Out the Issuance of Local Government Special Bonds and Supporting Project Financing" was released.

　　This can be called a clever move!

　　We know that local government bonds are divided into "general local bonds" and "special local bonds"; general local bonds are non-profit in nature, while the latter require profitability.

　　The "new regulations on special bonds" state that projects that comply with national policies and have significant demonstration effects on the national economy and people's livelihood can be used as "project capital".

　　At the same time, "major projects with certain returns, which still have surplus income after repaying bond principal and interest," can obtain financing from financial institutions.

　　Why is this called a clever move?

　　1. Freeing the economy from the constraints of real estate development; 2. Reducing local government debt pressure; 3. Providing financing channels for financial institutions; 4. Alleviating market liquidity burdens.

　　New measure 2: Further promote automobile consumption

　　As a pillar industry of the national economy, the automobile industry should adopt a global and long-term perspective to boost the development of the automobile consumption market.

　　On June 7, the Development and Reform Commission website issued the "Implementation Plan for Promoting the Upgrade of Key Consumer Goods and Smooth Resource Recycling."

　　The regulator's purpose is very clear:

　　1. Grasp the major trend of industrial transformation and promote the competitive advantage of new energy vehicles; 2. Stimulate domestic demand and break down barriers in the automobile consumption market; 3. Further guide innovation in automobile consumer financial products and lead new economic development.

　　Another clever move with multiple benefits!

　　New measure 3: Commercial use of 5G

　　On June 4, the Ministry of Industry and Information Technology announced that 5G commercial licenses would soon be issued to operators; on June 6, licenses were issued to the three major operators, taking only two days, marking 2019 as the inaugural year of 5G commercial use.

　　5G not only targets individual consumers but also the entire society, and will better gather industrial resources and promote industrial upgrading in the future.

　　02 Medium- and long-term funds begin to be favored

　　The country gradually realizes that not all funds entering the stock market are "vegetables in the basket"; some may be "poison."

　　What the stock market needs is medium- and long-term industrial capital, not short-term monetary capital.

　　Therefore, 1. 70% of offline issuance of stocks on the Science and Technology Innovation Board must be invested in institutional investors, and these investors are not only "smart money" but also "wise money" keen on stable investment, including pension funds, social security funds, insurance funds, etc.;

　　2. Insurance funds' book balance for "equity assets" is expected to have further quota relaxation;

　　3. The third pillar of pension insurance construction will also be launched, and compliant bank wealth management, funds, and other financial products will become targets of the third pillar, bringing new incremental funds to the capital market, most importantly, these are medium- and long-term funds.

　　03 Financial market more open, financial regulation stricter

　　June 13 is a day worth remembering for China's capital market.

　　On this day, the Science and Technology Innovation Board officially opened, taking 220 days from conception to reality. Incremental reforms in the financial market further optimize the current stock market, driving comprehensive reform of the entire capital market.

　　At the same time, 1. Regulators gradually relax control over China's capital market, allowing foreign capital to hold controlling stakes in China's securities, funds, and other industries; 2. FTSE Russell, S&P Dow Jones, and MSCI expand the inclusion ratio of A-shares; 3. The total quota for RQFII and QFII to allocate A-shares is increased...

　　Regarding financial regulation, the China Securities Regulatory Commission points out "four bottom lines"

　　No disclosure of false information, no insider trading, no stock price manipulation, no harm to the interests of listed companies, all intermediaries fulfill their duties, purifying the market ecology...

　　Finally, I would like to share a few of my own views:

　　First, regulators gradually realize that the old approach of stimulating stock market prosperity is wrong.

　　What is the old approach? Flooding the market with liquidity repeatedly, hoping to create a "bull market" by flooding the stock market, which often results in a rapid rise followed by a sudden collapse.

　　The current reform does not start with "flooding liquidity" but begins with deep reforms of the real economy. The current logic is, isn't the purpose of "flooding liquidity" to support real economic development? Wouldn't it be better to promote economic development without flooding liquidity?

　　Second, change the old way of "stimulating" China's economy, making stock market rises have a realistic foundation.

　　Previously, economic stimulus focused on repetitive construction in traditional industries; the current "stimulus" targets emerging industries and provides a foundation for high-tech industries.

　　Third, the supply method of stock market funds has changed, and the capital market system is more market-oriented.

　　There are fewer dead elements and more active elements in the capital market; the market's vitality naturally attracts medium- and long-term funds to settle in for the long term.