Who Is The Biggest Beneficiary Of The Central Bank'S Double Fall?

The central bank's double down has limited impact on the real economy.

The sell-off of epic levels at the end of Friday could trigger a wave of additional margin on Monday.

Can the market be available from the central bank for the weekend?

It remains to be seen that the rally is not triggered.

Traders may seize the fleeting technology rebound and clear up, and continue to trigger short-term fluctuations in the market.

However, after short-term fluctuations, policy stance and continued easing should support big blue chips.

But the recovery of blue chips will inevitably consume more and more market liquidity.

The ratio of market capitalization to GDP is approaching the peak of 07 years, indicating that market liquidity is rapidly being consumed and restraining the rebound of the market index.

The central bank's double down has limited impact on the real economy.

With a highly leveraged weak rival market, the market can be truly stable: last week was an epic level crash.

The key question now is whether the two sides of the central bank can stabilize the new financing market that may trigger off last week's collapse.

We estimate that the balance of margin trading through non brokerage channels and umbrella trust can be as high as two trillion yuan - almost double the two financial balance monitored by the SFC.

The margin ratios of these margin accounts are higher than those on the floor.

The disk is higher, often from 1:3 to 1:5, and the annual interest rate is about 20%. These OTC funds can buy any stock - not just limited to the stock market of the CSRC.

Therefore, if the market plummeted to the 17%-25% interval, these accounts would be largely liquidated if they could not make up their positions.

In fact, the market has plummeted by about 20% in the past two weeks, which should trigger a wave of additional margin.

The intensity of the sell-off last week showed that many accounts did not seem to fill their positions.

The market has been expecting to cut interest rates: double down is a powerful drug.

but

The previous downturn has suggested that the market price is reflecting this easing.

In addition, we have repeatedly pointed out that China's real effective interest rate hovered at a historical high.

At the same time, lowering interest rates and saving rates at the same time does help ease market sentiment, but it does not seem to have much effect on the balance of the financing plate, and it is more likely that the market sentiment has a short technical rebound due to a downgrade, allowing traders to retire all over the body.

At the same time, the decline in market interest rates has at least partially reflected the expected interest rate cut, while the decline in foreign exchange reserves needs to be reduced to hedge, so the impact of the double drop on the real economy is limited.

Recent weak credit demand and other economic data show that the real economy is still at a low level.

After the short term fluctuations, we should pay attention to big blue chips: in our June 16th report entitled "Great China Bubble: 800 years of history", we used a more intuitive framework to assess the current market situation.

We believe that the frequent emergence of extreme returns and the extreme market turnover are signs of the late bubble.

Traders must constantly compare the expected return of the existing position and the immediate return of profits in the time window that is constantly decreasing.

However, it is hoped that sustained probability of extreme returns is like that of every hand that can be touched by flush (83, -3.85, -4.43%) is generally not sustainable.

After 2 weeks of plunging, sentiment has turned back from fanaticism.

With the low leverage of the high leverage margin account cleared, the remaining traders must consider whether their investment logic is changing due to a series of dramatic developments over the weekend and reconsider the allocation of positions.

The double fall after the collapse of the central bank clearly shows the determination of the policy to support the stock market.

Market

The price is still cheap, and its lower valuation can be a good defense tool in the current market turmoil.

However, we are worried that the collapse of the growth enterprise bubble may spread to other market segments. Meanwhile, the recovery of large blue chips will inevitably consume market liquidity and curb the rebound of the market.