Hot Review | High-Profile Stocks Massively Drop; Trading Position Disclosure System Needs Optimization
Duhuang Feng, a commentator for Every Step Forward
On November 1st, A-shares of 124 stocks hit their daily highs, while 165 stocks dropped. Among the falling stocks, high-profile names such as Changshan Beiming, Hai Neng Da, Shuang Cheng Pharmaceutical, and Oufei Optical occupied a significant position. According to statistics, there were 243 A-share stocks that doubled in value in September and October, with 43 stocks increasing by more than 2 times, including Ai Rong Software, Shuang Cheng Pharmaceutical, and Hai Neng Da, which all surged by over 600%.
The stocks being hyped up have no connection to their intrinsic value, basic fundamentals, or future expectations. Instead, they exhibit a concentrated atmosphere of hype, difference, and concept-driven trading. Using the example of the 43 stocks that surged by more than 200%, we can see from their market capitalization as of August 31st that the largest was Sichuan Changhong with a market value of 178 billion yuan, while the smallest was Anhui Phoenix with a market value of only 1.79 billion yuan. The average market value of these 43 stocks was 22.12 billion yuan, far lower than the overall A-share market average of 57.79 billion yuan. Looking at their performance, according to the quarterly reports, only 5 of these sample stocks reported net profits exceeding 1 billion yuan, while another 4 reported net profits exceeding 50 million yuan. Twenty-one of these stocks recorded losses.
In September and October, the Shen Wan Loss-Making Stock Index rose by a cumulative 49%, while the Wind A Index rose by 25%, and the Shanghai-Shenzhen Composite Index rose by 17.15%. The performance of underperforming stocks actually rose even more, which is contrary to the principles of value investing and long-term investing. More worrying is that after prices surged, they then plummeted, with only a small number of people likely to reap significant gains while many individual investors would suffer huge losses, which is detrimental to forming a healthy market ecosystem.
From information disclosure to trading position disclosure and guidance for individual investors, regulatory agencies have been strict in monitoring the trading of stocks with unusual price movements. Based on this foundation, I believe it is necessary to re-examine and assess the actual value of trading position disclosure information. For example, the Oriental Fortune Lhasa Branch, known as the "Lasa Heavenly Team", participated in a total of 19 stocks with buy/sell values exceeding 5 billion yuan, accounting for over 40% of their buying and selling in Oufei Optical, Sichuan Changhong, and Hai Neng Da. On October 28th to November 1st, the top 23 stocks bought by the Lasa Heavenly Team (with transaction values exceeding 2 billion yuan) included high-profile names such as Changshan Beiming and Run And Software.
The initial intention behind disclosing trading positions was to provide more detailed trading information to the market, but this has also amplified the "herd effect". For many investors, when a particular position appears, it means that the so-called "main force" is entering the market, and there will be scope for further hype. Based on this model, some advantage funds may further concentrate their capital in the Lasa Heavenly Team to fully utilize its promotional effects. I believe that if trading positions cannot effectively prompt risk warnings, they should be considered adjusted. By reference to the adjustments made by northbound funds information disclosure, trading position disclosure can also be extended or even discontinued without causing any damage to transaction efficiency and with the added benefit of improving market stability.