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: Shi Qian

In today's morning session, the Hong Kong stock market suddenly weakened significantly, with all three major indexes dropping more than 2% during the trading.$Hang Seng China Enterprises Index (800100.HK)$The decline once exceeded 3%. Among them, well-known Hong Kong stocks plunged across the board,$SUNNY OPTICAL (02382.HK)$at one point dropping more than 5%.$GEELY AUTO (00175.HK)$、$ABC (01288.HK)$、$SMIC (00981.HK)$、$CHINA LIFE (02628.HK)$、$BUD APAC (01876.HK)$It once fell more than 4%.

Driven by the Hong Kong stocks, the mainland$SSE A Share Index (000002.SH)$also continues to weaken.$SSE 50 Index (000016.SH)$Indexes that performed strongly before the festival have seen consecutive declines, indicating signs of chip loosening.$SSE Dividend Index (000015.SH)$also could not withstand the pressure of profit-taking. It is worth noting that government bonds continued to rise in the morning, and the increase was not small. After 10:30, Hong Kong stocks were again lifted by funds, and the decline of related stocks was also significantly narrowed.

So, what exactly is the reason?

Famous Hong Kong Stocks suddenly plummet.

On the first trading day of 2025, the market experienced a sudden change. The Hong Kong stock market suddenly weakened significantly, with all three major indices plummeting, and what’s even more puzzling is that well-performing famous Hong Kong stocks prior to the holiday today fell collectively.

$SUNNY OPTICAL (02382.HK)$ At one point, it dropped over 5%, $GEELY AUTO (00175.HK)$ 、 $ABC (01288.HK)$ 、 $SMIC (00981.HK)$ 、 $CHINA LIFE (02628.HK)$ 、 $BUD APAC (01876.HK)$ It once dropped more than 4%. $CM BANK (03968.HK)$ 、 $ICBC (01398.HK)$ 、$CHINA FEIHE (06186.HK)$、$WUXI APPTEC (02359.HK)$、$XINYI GLASS (00868.HK)$The decline was also quite significant. Subsequently, the decline narrowed somewhat, but compared to previous trends, these stocks still experienced a large decline.

Among these,$XINYI SOLAR (00968.HK)$and $XINYI GLASS (00868.HK)$ Dongfa issued a profit warning, predicting that the net profit for the year ending December 31, 2024, will decline by 70% to 80% year-on-year and by 30% to 40%, causing the stock price to plummet accordingly.

In addition, China $BABA-W (09988.HK)$ Group announced on Wednesday evening (January 1, 2025) that its subsidiary New Retail has reached a deal with Deyong Capital to sell all shares of the parent company of RT-Mart for approximately 13.138 billion Hong Kong dollars.$SUNART RETAIL (06808.HK)$High-end retail stock plummeted 35% in early trading on Thursday. Subsequently, the drop in the stock price narrowed.

With the plunge in Hong Kong stocks, A-shares also faced pressure in early trading. $SSE 50 Index (000016.SH)$ and$CSI 300 Index (399300.SZ)$The declines have all reached over 1%, with large-cap Stocks almost entirely selling off (at one point, only two out of the top 30 by total market value were rising in the morning session). However, from an overall perspective, more than 3,700 Stocks rose this morning, with the number of Stocks hitting the daily limit exceeding 70 at one point.

It can be said that most Stocks performed far better than the Index. This is completely different from the market performance before the holiday. Additionally, it is worth mentioning that the upward momentum of government bonds has not yet ended. In the interbank market, the yield on the 50-year government bond active issue '24 Special Treasury Bond 03' fell by 3.5 basis points to 1.97%. Wind data shows that compared to the same maturity China bond yield, it has reached a historical low.

What has happened?

Analysts believe that it may still be largely related to the movement of the US stock market. In fact, there have been signs of loosening chips in the US stock market recently. Since December 5 of last year, $Dow Jones Industrial Average (.DJI.US)$ There is a clear weakening. $Nasdaq Composite Index (.IXIC.US)$ The last few trading days can also be described as a lack of vitality.

On one hand, the issue of US national debt will ferment in 2025, and the market may trade this event in advance. According to institutions, nearly 3 trillion USD of US debt will mature in 2025, most of which is short-term debt that the US Treasury Department has issued in large quantities in recent years. As the US government is expected to attempt to extend the debt maturity during this period, if the market is not prepared to absorb the large-scale issuance of US national debt expected to cover nearly 2 trillion USD budget deficit, this may bring another troublesome issue.

Normally, the US Treasury Department tends to control the issuance of national debt to about 20% of total debt. However, in recent years, due to ongoing debt ceiling and budget disputes, and the need for the Treasury to raise funds immediately to keep the government running, this proportion has gradually increased. According to the Securities Industry and Financial Markets Association, as of November 2024, the total issuance of US national debt reached 26.7 trillion USD, an increase of 28.5% compared to 2023.

On the other hand, there is the Fed's interest rates. Goldman Sachs reported that the forecast for the Fed to cut interest rates this year has been reduced from 100 basis points to 75 basis points, claiming that reporting on core inflation rebounding has been greatly exaggerated. Core PCE inflation had an annualized increase of 2.5% from September to November last year, slightly higher than 2.3% in the previous three months, but lower than the annual increase of 2.8%, still consistent with the trend of a continuous decline. The report also stated that the adjusted average PCE inflation by the Dallas Fed for the period from September to November last year was 2.4%, with November's figure at 1.8%. As the labor market tightens back to 2017 levels, the annual wage growth rate has slowed to 3.9%, within the range of 3.5 to 4%. If productivity grows by 1.5 to 2% in the coming years, it will align with 2% inflation.

The problem that arises from this is,$USD (USDindex.FX)$The rise in US Treasury yields continues to impact the valuation levels of equity assets. Recently, the USD has surged above 108, while non-US currencies have seen a continuous decline. However, there is one exception— the Hong Kong dollar. Due to the presence of the linked exchange rate system and the year-end demand for funds, the interbank lending rate for the Hong Kong dollar soared significantly before the holiday.

Editor/Rocky