Comment On The Deep Reasons For The Market Speculation Of Poor Performance Stocks

Yin Zhongli (chief economist of Rongsheng development and researcher of Institute of finance, Chinese Academy of Social Sciences)

From the normal logical reasoning, with the deepening of the registration system reform, the "shell value" of a shares should be the trend of depreciation. But at the end of August this year, after the registration system reform was implemented in the GEM market, some underperforming stocks were stir fried, and the "shell value" rapidly appreciated. Is the growth enterprise market "speculation small" and "speculation bad" caused by the reform of the trading system or other deep-seated reasons?

On August 24, a new trading system was formally implemented in the gem, which expanded the limit range from 10% to 20%, indicating that the registration system reform was officially implemented in the gem.

Although the registration system has been running smoothly for more than a year before the implementation of the registration system reform in the gem, it still has a certain degree of impact when it is promoted to the GEM market. After the implementation of the new trading system on the gem, the market appeared the phenomenon of "small speculation" and "bad speculation". During the more than ten trading days from the end of August to the beginning of September, some small market value stocks in the GEM market were speculation by funds. Statistical data show that during the period from August 24 to September 8, 10 GEM stocks rose more than 100%, 110 stocks rose more than 50%, and 1 / 3 GEM stocks rose more than 30%. The three most representative stocks are Tianshan bio, long group and Yu diamond. Their market value rose by more than 150% in 11 trading days. The first Tianshan bio increased nearly four times, while the gem index only increased by 0.69%. This shows that the index stocks of gem did not change due to the implementation of the new trading system, and the capital boom is mainly small market value stocks Tickets. Statistics show that the average market value of the stocks in these gem markets was only 3.7 billion yuan before the stock price rose. The three most representative stocks were Tianshan biology, long group and Yu diamond, all of which had a market value of less than 3 billion yuan before they were launched. Therefore, it is correct for the regulatory authorities to determine that "speculation is small" and "speculation is poor".

How to look at the performance of the gem after relaxing the limit of the rise and fall of stock trading? We think it is necessary to analyze the causes of the problem in order to find the right way to solve it. After the reform, the reasons for "small speculation" and "poor speculation" on the gem can be summed up as follows:

First, the registration system has relaxed the financial constraints of delisting listed companies. The financial indicators of the original delisting system are as follows: for two consecutive years, the delisting risk warning will be issued, and for three consecutive years, the listing will be suspended. According to this regulation, Tianshan bio will face the risk of suspension of listing if it continues to lose money in 2020. The new delisting standard is revised as follows: cancel the suspension of listing, direct delisting when the delisting standard is met, and introduce portfolio financial delisting standard. According to the new delisting criteria, Tianshan bio may be exempted from delisting if its income exceeds 100 million yuan this year. This has bought time for the money to be bailed out.

Second, Zhuang Gu's self-help behavior. Because of the implementation of private placement in a few years ago, the stock price of some stocks has fallen all the way, and the investors who participate in the fixed increase are held in high position. The modification of the trading system provides an opportunity for these funds to save themselves.

After the IPO, the total share capital of the company was only 2.273 million in 2012. In 2016 and 2018, the total share capital was expanded to 313 million shares. The prices of the two fixed increases were 16.24 yuan and 15.53 yuan respectively. However, the company's operating conditions deteriorated. In 2018 and 2019, the company lost money for two consecutive years, and the share price continued to fall to about 5 yuan. More than 60% of the capital involved in the fixed increase has been lost, and investors have been seriously locked up. If there is a 1:1 leverage for the funds involved in the fixed increase, then the positions of these funds have burst, and the institutions providing funds will also face bad debt losses.

Theoretically speaking, the change of trading system will not change the trend of stock price operation, but for the deeply trapped funds, the change of trading system is the only straw to save life. Only by fighting back to back, can we complete the task of self-help. Perhaps, this is the reason why Tianshan biological and other stocks soared.

According to the author's statistics, most of the more than ten stocks whose stock prices rose by more than 100% in the above time window are highly similar to Tianshan Bio: they have implemented fixed increase before and after 2016, and all investors participating in the fixed increase were locked in high positions.

What needs to be added here is that around 2016, participating in the fixed increase of listed companies was once a popular arbitrage behavior. From 2015 to 2017, the total amount of refinancing of listed companies exceeded 4 trillion. Many of the funds involved in the fixed increase were more than doubled in financial leverage. Therefore, these funds were deeply locked in high positions. From a time point of view, the current is just the period of lifting the ban of funds participating in the fixed increase. It is the common goal of these funds to raise the stock price so as to release the arbitrage at a high level.

Third, it is caused by business transformation or asset restructuring of listed companies. Most of the listed companies on GEM have small asset scale, and the difficulty of business transformation is smaller than that of large listed companies. Many GEM companies have been looking for business transformation opportunities after listing. Once the transformation is successful, they can be recognized by market funds, and the stock price will rise greatly in the short term. In our statistics of the relatively large increase in the stock, there are some of this kind of situation.

Therefore, the author believes that it is not the reform of the trading system that leads to small speculation and poor speculation, but that the deep locked up funds seize the opportunity of the reform of the trading system and strive to save themselves. The rise of shell value is only a short-term phenomenon, and the long-term trend of shell value should be sustained depreciation.