There is a saying about soccer games; as long as they are still on the field, there is a possibility of a turnaround.

This was originally very inspirational, but when it came to some people, it became derogatory. For example, some listed companies are not good at doing business and are not good at rewarding shareholders. What they believe is that as long as they are still in A-shares, they can use their listed status to continue cutting chives.

Recently, various social media investment groups are circulating a list that lists many companies with A-share problems, and the number is several hundred.

The conclusion is very simple and crude. These companies explode when light, and delist when serious. Investors are strongly advised to avoid them.

Since the new village chief took office, the topic of delisting has always been very hot; this time it really wasn't the wolf.

01

Who's on the lightning list?

When it comes down to this list of lightning explosions, there are probably a few types:

First, the case was opened and investigated by the Securities Regulatory Commission;

Second, if there is a problem with the audit, the firm is unwilling to express an opinion;

Third, those that are financially risky, or insolvent, or have lost money for too long;

Fourth, the market value is too low, and the stock price is too low;

Fifth, other risks, such as dividends, are inconsistent with current policy propositions.

Exactly what they are, I won't be announcing them all here. I believe many people have read it, and this is actually no secret. Anyone can pull up such a list with any stock trading software.

In fact, what is important is not the list itself; it is necessary to clearly see one of the general directions of A-share reform. That is, delisting is no longer just rhetoric; it is likely to become the new normal in the future.

The previous position of the capital market has always been a financing market, serving the real economy. Investors give money, and companies get money, and they can solve many real problems, such as employment, taxation, and GDP, but everything has two sides. The financing market has solved the problems it wanted to solve, but who can solve the investors' return on investment problems?

In a stock market, only if investors actually make money will investors continue to invest in it, and eventually form a positive cycle. On the contrary, a market that only cuts investors' leeks and occasionally gives investors some sweet money. Over and over again, the only thing that ultimately harms them is themselves.

Fortunately, the previous management has approved this reform idea. In particular, after the new village chief came in, a great deal of work was done on delisting the market and repaying investors.

If it were in the past, it would be questioned and taken as a blessing, but in the present moment, the situation would also force reforms.

So, this time, the market has seen this kind of determination, which also means that in the future, if more and more companies actually reach the point of delisting, it is impossible not to leave.

At this point, there will be more and more things in the market that you think are impossible to happen.

For example, ST Baoli's stock price fell to 9 cents, setting a new record for the lowest stock price in A-share history.

People are watching a lot of fairy stocks in the Hong Kong stock market; I didn't expect A-shares to be there too. However, there is no doubt that such stocks will be delisted.

02

Don't worry about ST

In A-shares, like the “ST game” strategy and the “speculation” strategy, there has been a group of loyal fans for a long time.

They are obsessed with being able to reap huge gains in a short period of time, and they don't need to pay too much, because the market capitalization is already very small. By partnering up, everyone can easily pull out a few ups and downs with some money. Coupled with the fact that there are too many retail investors and they are eager to make money, it is easy to be attracted to it. The result was all kinds of travel, sitting, internal and external cooperation, and playing board together.

If you only look at short-term returns, this can really make a lot of money. However, if you look at it from a prudent point of view, this money is actually difficult to earn. Unless you are really a big player, the funds in your hands are enough to influence stock price trends, or a party involved in internal and external cooperation, then they are slapping their blood.

This situation is actually somewhat similar to the old thousand stocks on Hong Kong stocks. The business isn't doing very well, but when it comes to all kinds of chopping chives, they are worse than others. After so many years, few retail investors have been able to make money from it; instead, the vast majority have become leeks.

Many people criticize that A-shares are not a valuable investment; in fact, it is not unrelated to this ecosystem.

Why can US stocks improve over the long term? Good companies are getting better and better is also related to their own survival of the fittest mechanism; it can even be said that it is one of the decisive factors.

Have you ever wondered why there are thousands of US companies, and in the end, you only remember the NASDAQ “Seven Sisters,” is it just because of their large market capitalization and high growth rate?

Actually, that's not true. Instead, I think capital will only be concentrated in these companies with high fundamentals, strong profitability, large repurchase dividends, and some growth potential. Conversely, companies that have poor fundamentals, weak profitability, and don't pay attention to shareholder returns will either change their lives against the sky or just walk away.

Therefore, as bad companies are constantly being removed from the metabolism year by year, the market will naturally eliminate the weak and remain strong. The remaining good companies and capital will watch the scene in front of them. Naturally, they will group up the good companies without getting involved in the poor companies.

There are two interesting pieces of data.

One is from last year's Hong Kong stock market:

On September 21, out of 2,959 Hong Kong stocks, 926 stocks (including suspended trading) had zero transactions, accounting for about 31%;

1,207 units with a turnover of less than HK$10,000, accounting for 40.8%;

Individual stocks with a turnover of less than HK$1 million reached 2,127, accounting for 71%.

Only 113 units had a turnover of over HK$100 million, accounting for less than 4%.

With a market capitalization of $3 trillion, Tencent's full-day turnover was only HK$5.39 billion.

The other is for US stocks. Throughout 2023, the top 50 US stocks accounted for 41% of the total turnover. The top 1000 stocks accounted for 91% of the trading volume. The latter 3,000 stocks accounted for only 1% of the trading volume, and the share of the latter 1000 companies was basically negligible. Taking January 19, 2024 as an example, US stock companies with a single-day turnover of less than 10 million yuan accounted for 42.7%, and 21.9% for less than 1 million yuan.

In contrast, A-shares over the same period were much more balanced.

In a mature market, capital naturally favors large companies with high fundamentals, stable performance, and good dividend records, while small companies with poor fundamentals, high performance fluctuations, and uncertain prospects are only marginalized.

A mature market mechanism should use “money” to reward good companies, and also punish bad companies by delisting the market.

03

epilogue

After more than 30 years of development, although A-shares still have quite a few institutional problems, there is no doubt that they will become more and more mature markets. However, the trend of conversion of A-shares into Hong Kong shares will only strengthen, not decrease.

The reforms will continue to advance, whether fast or slow, but the general direction is certain.

Having understood this logic, the next step is to make an investment, especially a long-term investment.

In a word, embrace big companies and good companies. Even if you choose the wrong time and the purchase is expensive, as long as you can afford it, they will come back eventually. Conversely, if it's a game against small companies that don't have fundamental guarantees, they will be very excited when the stock price rises, but if something goes wrong, it will fall into disarray.

As Dan Bin said, you need to go to the ocean to catch whales, not to catch loaches in muddy ponds.

As a special reminder, if you're still obsessed with speculation and have lots of themed tickets in your hand, it's best to be prepared to return your positions to zero, because this day will come sooner or later. (End of full text)