Source: Brokerage China Author: Qu Hongyan Recently, China Yangtze Power hit a historical high and once again showed the slow bull stock trend of "tripling in ten years". The slow bull market has left behind many passers-by and brought good returns to the steadfast investors. It is "rare for those who triple in one year to be like carp jumping over the dragon gate, while those who double in three years are few and far between." On the other end of the investment world, however, violent collapses are also deafening, with many financial products suspected of "Ponzi schemes" ceasing payments, leaving investors with no hope of recovering their investments. Both positive and negative cases illustrate the importance of forming a suitable mentality towards money in one's lifetime; otherwise, sooner or later, you will divorce yourself from your money. "I call this the money mind, a person's IQ can reach 120, 140, or even higher levels, and perhaps some people's minds are good at doing one thing, while others are good at doing another. They can do things that most ordinary people can't do. But I know some very smart people who make very foolish decisions because they lack the money mind." Buffett once said so. The so-called money mind refers to believing in common sense, believing in compound interest, being cautious and rational, thinking independently, prioritizing security over return, not dealing with people with questionable character, not easily guaranteeing for others, not believing in windfall profits, and not trying to cross legal norms for extra benefits. In today's world of ubiquitous information, everyone's wealth may become the "prey" of those with ulterior motives. Only with the money mind, can one form good behavior habits and shield oneself from separating from one's wealth. Do not entrust your wealth easily. Wealth is easy to lose but hard to accumulate, and trust is a vital reason leading to the rapid loss of wealth. "Do not allow anyone else to manage your business unless you can watch their every move closely and understand their behavior; or you have strong reasons to believe in their character and ability. For investors, this criterion determines when you can let someone else make investment decisions for you." Graham's criterion written eighty years ago is so clear. Almost all the investors who lost their wealth in the financial products have violated the above two criteria. They did not have the ability to closely supervise the whereabouts of their funds, nor did they have sufficient reasons to believe in the character of the product issuers. They easily invested their own wealth solely based on others' glib tongue and a piece of commitment paper. They did not act as gatekeepers of their own wealth and ended up with nothing left even if the government punished the wrongdoers. "An ounce of prevention is worth a pound of cure." This is a phrase Munger often says. Destiny must be in one's own hands, and investors with a suitable money mind will try their best to find suspicious points in their investments to protect the safety of their principal. For example, whether the manager is trustworthy, whether the underlying assets are profitable, whether oneself can timely monitor the risks in the investment process, and whether the sales staff is obtaining large commissions. As long as any unreliable signs are found, these investors firmly will not invest their money. Do not desire to get rich quick. As in the capital market and anywhere else, making money is not easy, and desiring to get rich quick will lead to quick loss of wealth. In the capital market, the desire to get rich quickly often leads to investors over-allocating specific stocks, industries, or assets at the worst time. For example, buying high-risk stocks that can gain huge returns once an adventure succeeds, but the chance of success is very small, also known as "whispering stocks" by legendary fund manager Peter Lynch. "They often tell investors a story with explosive effects. These 'whispering stocks' have a hypnotic effect on people, and it is easy for you to believe that the story the company tells has an emotional appeal that can easily confuse you." This is like hearing a very tempting "sizzling" sound, making you salivate, but you did not notice that there is no steak on the grill. In the eyes of investors who lack the money mind, stable yield provided by blue chips such as China Yangtze Power cannot meet their demands. However, historical experience clearly shows that buying stocks lacking in safety solely based on imagined high yields is unwise. The long-term average investment return of general stocks is 9%-10%, which is also the average investment return of stock indexes in history, a benchmark to measure one's investment performance and the benchmark to measure fund investment performance.
Author: Sun Xiangfeng

Pan Gongsheng revealed that the initial swap convenience operation scale is 500 billion yuan, and the scale can be expanded in the future according to the situation.

Many industry insiders told Securities Times · Broker China reporters in interviews that the swap convenience tool will help enhance the stock holding capabilities of securities and other financial institutions, better play a stabilizing role in the market. The swap convenience tool adopts the method of "swapping bonds for bonds," where financial institutions can exchange assets such as ETFs with poor liquidity, CSI 300 component stocks, etc., for assets with higher liquidity such as national bonds, central bank bills, to enhance their own convenience and financial strength in market financing, thereby helping financial institutions to invest and increase stock holdings in the capital markets.

At the same time, although the creation of swap convenience tools will not increase the base money supply, it can significantly enhance the liquidity of securities, funds and other financial institutions, strengthen the financing capabilities and financial strength of institutions, and promote financial institutions to better play the role of stabilizing the market.

Innovative tools stabilize the market

The mechanism of swap convenience is "swapping bonds for bonds." According to the remarks of the Governor of the Central Bank, Pan Gongsheng, securities, funds, and insurance companies can use eligible bonds (credit bonds), stock ETFs, CSI 300 component stocks and other assets as collateral to exchange for national bonds and central bank bills, in order to obtain liquidity support. Therefore, non-bank institutions collateralize low-liquidity assets in exchange for high-liquidity assets from the central bank.

In overseas experience and in the practice of our country, there are tools similar to the convenience of swaps. During the 2008 financial crisis, the Federal Reserve introduced the Term Securities Lending Facility (TSLF), allowing primary dealers to use securities with poor liquidity as collateral, borrow high-liquidity treasury bonds from the Federal Reserve, facilitate financing in the market, and have a stimulating effect on the market. It was also reintroduced in 2020.

A similar tool in our country is the Central Bank Bills Swap (CBS) introduced in 2019, which allows primary dealers to swap perpetual bonds from banks into central bank bills. This tool enhances the market liquidity of perpetual bonds issued by banks, increases the willingness of the market to subscribe to perpetual bonds issued by banks, thus supporting banks in issuing perpetual bonds to supplement capital and creating favorable conditions for increasing financial support to the real economy.

Lu Zhiheng believes that the effect of swaps is to revitalize the existing assets of securities, funds, and insurance companies, incentivize their active participation in the market, promote market activity, and stabilize the market. At the same time, it avoids non-bank institutions cashing out due to liquidity issues, prevents market stampedes caused by homogenization of transactions, redemption pressures, and other possible factors.

"The convenience of swap tools will help enhance the shareholding capacity of securities and other financial institutions, and better play a stabilizing role in the market." Yan Xiang, Chief Economist of Huafu Securities, expressed in an interview with Securities Times · China Securities Journal reporter that the swap tool adopts the method of 'swapping securities for securities', exchanging for assets with higher liquidity such as treasury bonds, central bank bills, to enhance their own convenience in market financing and financial strength, thereby helping financial institutions to invest in the capital markets, increase shareholdings. The creation of swap convenience tools can significantly improve the liquidity of securities funds and other financial institutions, enhance the institutions' financing capabilities and financial strength, and promote financial institutions to better play their role in stabilizing the market.

Wang Yi, Chief Economist of China Great Wall Securities, told Securities Times · China Securities Journal reporters: "The creation of new tools in the capital market this time is another specific implementation of the new '9 national policies' requirements, and the new tools exceed market expectations."

Wang Yi stated that during the global interest rate cut cycle, new tools in the capital market help further alleviate the micro liquidity of the stock market, boost market sentiment, and risk appetite. The central bank governor also emphasized, "The convenience of swaps can only be used to buy stocks, with an initial approval of 500 billion yuan. As long as the effect is good, there can be multiple tranches of 500 billion yuan." The continuity and intensity of follow-up capital market policies are guaranteed.

"The continuity of policies continues, and with the market itself spontaneously entering a bottoming phase, corresponding bullish policies will significantly enhance the funding of the stock market, providing assistance for the sustained rebound from the bottom." Wang Yi said.

Will not increase the issuance of base currency.

There are different views in the market regarding the convenient operation paths for swaps.

Wang Yi believes that brokerages, funds, and insurance companies swap their stocks and etfs for central bank bonds and central bills, sell them in the secondary bond market, and can only use the proceeds to buy stocks. As bonds need to be sold in this process, it indirectly achieves the goal of restraining the rapid decline of long-term government bond yields.

On the other hand, Luo Zhiheng believes that non-bank institutions, through swaps, obtain central bank bonds and central bills but most likely cannot be resold, only used as collateral for liquidity. According to the rules of the central bank's bill swap tool, 'swapped central bank bills cannot be used for spot trading, repo transactions, but can be used as collateral, including as collateral for institutions participating in central bank monetary policy operations'.

"Since 'convenient swaps' and 'central bill swap tools' have similarities, we infer that assets such as government bonds obtained from the central bank cannot be directly traded for cash. In other words, there is no chain of 'buying stocks - swapping bonds with central bank - then selling the bonds.'" Luo Zhiheng stated.

Some brokerage professionals also told Securities Times • Securities China reporters that it is currently unclear how the exchanged bonds can be operated, but most likely they will be used as collateral.

It should be noted that the convenience of swaps does not involve direct money transfer and will not expand the basic monetary supply. Securities, funds, and insurance companies' swap convenience is based on a "swap for securities" approach, which not only enhances non-bank institutions' financing capabilities but also does not directly provide funds to them, thus not injecting basic money.

"The passive nature of the non-bank swap convenience, and the asset replacement rather than the basic currency injection tools, may include considerations to prevent supporting confidence in the capital markets while causing the over-issuance of the basic currency." Huajin Securities' chief economist Qin Tai told Securities Times • Securities China reporters that, until the central bank's balance in trading government bonds in the open market reaches a considerable level, the overall operation of using equity-type assets with significantly higher price volatility as collateral for liquidity assets or basic currency injections will maintain a relatively cautious pace. However, the appearance of the tool itself is expected to have a certain uplifting effect on market confidence.

Editor/Jeffy