Rebirth of the Capital Legend

Chapter 233 The market circuit breaker mechanism was triggered!

"It should have nothing to do with the trend of the Hong Kong stock market." Wang Shujie, the product manager of the 'Noah Blue Chip Hybrid Select' fund, also stared at the trend of the two markets and the performance of the major core lines of the market. After thinking for a moment, he said, "It's mainly a problem of capital. In addition, at the current time, the adjustments of major institutions in the industry have caused drastic fluctuations in the market."

"I thought we would have a good start," said Li Shangfeng, "but I didn't expect the index to plummet on the first trading day of the new year."

"However, the market has been adjusting for quite some time since early December," said Wang Shujie. "At this point, there is no need to panic. On the contrary, as many institutions adjust their positions, the main sectors where funds continue to flow in during the market's weak correction may have good opportunities."

“But looking at the current market trend, I feel there are problems with the market’s ability to sustain the market!” said Li Shangfeng.

"What's the problem?" Wang Shujie asked with a smile.

Li Shangfeng responded: "The core themes of the main board, such as 'big finance', 'big infrastructure', and 'big consumption', are relatively okay, but the concept stocks in the field of 'small and medium-sized enterprises', as well as many popular concept stocks that were previously hyped by the market and condensed the market's bullish sentiment, are obviously lacking in liquidity. It seems that the buying power on the market is completely unable to bear the selling power."

"The concept stocks of 'small and medium-sized start-ups' lack core logic support." Wang Shujie said, "These stocks should have been adjusted long ago. In fact, I would say... the investment ecology of the market should be shifted to the main board's weighted and performance blue-chip stocks. The concept stocks of 'small and medium-sized start-ups' without performance and growth support should return to where they came from."

Li Shangfeng said: "This is true, but market investment, in addition to the core underlying logic, also requires the cooperation of emotions. Without long sentiment and the positive and continuous profit-making effect in the short term, there will be no incremental funds entering the market, and naturally the overall valuation of the market will not be supported. After all, the core force that really drives stock prices upward is still the real incremental funding group."

"The short-term investment sentiment in the market is cyclical," said Wang Shujie. "In this regard, we don't need to worry too much. If the stock price falls too much, it will naturally rise. What we should examine now is the fundamentals of the stocks held by our fund products and the changes in expectations for future performance releases. As long as the fundamentals continue to change and expectations for future performance releases increase, the more the stock price falls, the more we should increase our holdings and buy."

"Boss, do you mean... we should continue to increase our holdings?" Li Shangfeng asked in surprise.

Wang Shujie nodded and said, "Buffett once said that when people are afraid, they should be greedy. At this moment, the market has adjusted from 3600 points to below 3400 points. There is enough time and space for short-term and medium-term adjustments. The corresponding negative factors are also fully reflected in the correction of the index.

Moreover, our fund products have heavy holdings in a number of blue-chip and white horse stocks.

Their fundamentals are generally improving, and it can be expected that their performance will show a growth trend in the coming quarter or even a year.

That is to say, with the decline in stock prices during this period.

Its valuation level is decreasing, while its investment profit and loss ratio is gradually increasing.

So... faced with an investment opportunity with a better profit and loss ratio than before, faced with stocks that are obviously undervalued, and we have plenty of funds, what reason is there not to buy?

In my opinion, this is not a crisis but an opportunity.

At the current stage, the main funds of all parties in the market have frequently adjusted their positions and changed their strategies, resulting in overly intense market fluctuations, leaving a good opportunity to intervene.

If we do nothing now, we will panic along with the market sentiment.

Then, when the subsequent market trend calms down, the pit created by the main funds' shifting of positions will be quickly filled by the influx of follow-up funds.

It will be difficult to find such a good entry time and intervention opportunity again.”

After hearing what Wang Shujie said, Li Shangfeng thought about it carefully. Although he did not agree with his point of view, he thought that the current fund position was not very high. At the same time, as investors continued to subscribe for shares, there would be a steady stream of off-market funds to supplement it. Therefore, increasing the position at this position was within a reasonable risk control range, so he could not help but respond: "Then I will let everyone increase the position size by another 5%."

"Okay." Wang Shujie nodded with a smile.

"But..." Li Shangfeng paused, and then said, "Which main direction should the newly added 5% position size be mainly used to build positions?"

Wang Shujie thought for a moment and asked, "What do you think?"

Li Shangfeng said: "According to the company's industry research and analysis report, as well as the trends of the major market trends in the past six months, the main line of 'consumption', especially the 'food' and 'beverage' sectors, should be the most obvious reversal, and the future performance is expected to explode."

"I think so too," Wang Shujie said. "There are already many signs of consumption recovery."

"Then we should focus on consumption?" Li Shangfeng said.

Wang Shujie pondered for a moment and responded: "To be precise, we can take the initiative to further increase our holdings in the 'white wine' sector. I feel that the fundamentals of first-tier white wine brand companies such as 'Qianzhou Moutai', 'Wuliangye', 'Luzhou Laojiao', etc. continue to improve, and their performance also shows signs of full recovery. At the same time, due to the negative impact of the industry in the past two years, the market valuation of this sector has been compressed extremely severely.

In other words, once the performance of the core stocks in this sector reverses across the board.

There is a strong expectation gap, and there is a possibility of a Davis double-click."

"Hehe..." Li Shangfeng said, "It seems that my thoughts are consistent with those of the boss. In the main field of 'big consumption', I am also optimistic about the subsequent trend of the 'white wine' sector. Moreover, through the analysis of the market trend in the past six months, it is obvious that the trend of the core stocks of the 'white wine' sector is obviously stronger than the overall market. It seems that quite a few major capital groups have already established large-scale positions or held positions in this main field."

Having said that, he didn't wait for Wang Shujie to give any more instructions.

He then turned to all the traders in the entire trading group and issued corresponding trading instructions, asking everyone to take the initiative to take over the chips of several core stocks in the "white wine" sector during the market crash and increase the fund's holdings in this main field.

And the fund product 'Nuoan Blue Chip Mixed Selection'.

When the fund manager quickly changed its strategy and planned to further increase its holdings and increase the weight of its holdings in the "white wine" sector...

At the same time, inside the Jufeng Asset Management Company in Shanghai.

In the 'Jufeng Future Growth' fund product trading department, Lu Xiangxiang, general manager and fund product manager of the company, stared at the continuously falling market of the two markets, especially at the main line of the 'new energy industry chain' which had shown a general limit-down trend, and the trend of many core stocks in the 'lithium battery' sector. Her brows were obviously furrowed, and she felt a sense of unusual crisis in her heart.

"Mr. Lu, the market trend today is a little strange."

While Lu Xiangxiang was frowning in thought, Yu Xiaolu, the fund product trading team leader, also hurriedly reported: "Many of the previously popular stocks have lost their market support and are falling to the limit. After the adjustment in December, the market has entered a new month. After the holiday mood, the bullish sentiment has not warmed up, but has further dispersed.

This continues...as market sentiment collapses further.

I feel that the liquidity crisis will occur again.

I seem to feel the market trend atmosphere during the "stock market crash" in the current market.

Among them, our fund products have heavy holdings in the core stocks of the "lithium battery" line, whether it is "Tianqi Lithium", "Ganfeng Lithium", "Dofluoro" and other large-scale mid-cap stocks, or "Tianci Materials", "Penghui Energy", "Dangsheng Technology"... these small-cap stocks.

The current stock price trends have already broken through, and the technical pattern has completely deteriorated.

This form is assisted by a complete emotional breakdown.

Even if the industry fundamentals are excellent and the underlying logic of the main line of the 'new energy industry chain' is still there, I am afraid it will inevitably encounter a huge adjustment, which will bring a huge drawdown to the net value trend of our fund. " "Then according to you...what should we do now?" Lu Xiangxiang asked.

Yu Xiaolu responded hastily: "Mr. Lu, I think we should stop profit first and control the decline of the net value of our fund products. We cannot ignore the market sentiment and we cannot make the same mistakes as in the previous two stock market crashes. In this situation, I feel that the market liquidity has problems."

Lu Xiangxiang looked at the funds' heavily-weighted stocks that were still plummeting, and also looked at the Shanghai Composite Index which had fallen by 3% and completely lost the 3400-point support platform. She sighed helplessly and nodded.

Although she is still optimistic about the market trend of the core main line of "new energy industry chain", she is still optimistic about the relevant upstream leading companies in the field of "lithium battery", and she is still optimistic about the prices of "lithium carbonate" and "lithium hexafluorophosphate". With the rapid explosion of market demand, higher prices can be achieved.

But just like Yu Xiaolu said.

When the index and individual stocks fell below important support levels, market investment sentiment had completely collapsed.

In order to avoid a huge drawdown in the fund's net value, and also to prevent the market from experiencing another "stock market crash" situation caused by a liquidity crisis.

She must reflexively make a strategy of taking profits and reducing positions to control the extent of the fund's net value drawdown.

After Lu Xiangxiang nodded in agreement, Yu Xiaolu did not hesitate and quickly issued a sell-to-profit trading strategy to all traders in the trading room, requiring everyone to sell off the fund's heavily invested "lithium battery" main line stocks at the market price, regardless of cost, free up positions, and recover funds, thus avoiding the risk of a continued market crash.

The main institutions that adopted the same trading strategy as them continued to reduce their positions and stop losses during the market crash.

Even major speculators and retail investors.

As market trading hours go by and market sentiment continues to decline, the number of such cases is increasing.

We even saw the Shanghai Composite Index approaching a 4% intraday decline, especially the 'CSI 300 Index' rapidly approaching a 5% decline.

Many big funds know that the market has activated the circuit breaker mechanism.

They were even cutting their positions like crazy.

The liquidation of these funds led to a further plunge in the market near noon.

It also caused a lack of market liquidity, resulting in more and more stocks losing their ability to carry on the market and being directly blocked at the limit down by the fleeing selling group.

Finally, when 11:30 arrives, the market closes at noon.

The number of stocks that hit the daily limit in the two markets increased rapidly in the last ten minutes before the midday closing, directly jumping from more than 200 to more than 700.

"Oh shit, it feels like thousands of stocks are going to hit the limit down again today!"

After the midday closing, as the market panic continued to ferment during the rest period, Xu Qiao, a member of the main hot money group "Magic City Super Short Gang" where Su Yi was located, said.

"I feel the same way." Lao Zhang responded, "Damn it, a good start turned into a bad start!"

"According to the new regulations, at what level will the index fall before a circuit breaker occurs?" asked Old Wu.

Brother Chen responded: "If the CSI 300 Index falls by 5% during the day, a circuit breaker will occur. After 5 minutes, trading will resume. After that, if the CSI 300 Index falls by 7.5%, a second circuit breaker will occur. The second circuit breaker means that trading will be stopped during the day and the market will close early."

"It feels like the market today is about to trigger the circuit breaker mechanism," said Lao Zhang.

Old Wu replied: "If there is not enough positive impact within this hour, the index will definitely hit the circuit breaker when it opens in the afternoon. Because after everyone knows this rule, the closer the index falls to the circuit breaker mark, the more panic will arise. It's like a siphon effect. In order to compete for liquidity, everyone will rush to dump the market."

"Today... feels like it's over!" Xu Qiao said, "It's probably going to make history again."

Lao Zhang said: "It's nothing new that the A-share market has created history. Fortunately, I have already cleared my positions in December, so I can just watch the show from the sidelines."

"I did buy some chips when the market opened low in the morning." Xu Qiao said, "But in the last few minutes before the closing, it had already hit the limit down."

As the group messages are updated...

At this time, there are major stock investment exchange forums, communities, BBS and other places on the entire network.

The discussions among countless retail investors are full of bearish voices, and even many people's stock holdings have been blocked at the lower limit.

Due to the further spread and breeding of panic.

Also due to the siphon effect of the circuit breaker mechanism and the lunch break, the regulators did not release sufficient positive news.

After a short lunch break...

When the market opens for trading again.

In less than 15 minutes, the CSI 300 Index hit a 5% drop, triggering the market circuit breaker mechanism, resulting in a complete lack of liquidity in the entire market.

And after the first circuit breaker, the market resumed trading.

However, after the resumption of trading, the market was assisted by more panic emotions and a more serious siphon effect.

It plunged downwards again at a rapid speed.

This time, in just a few minutes, the entire market triggered the circuit breaker mechanism twice.

The Shanghai Composite Index plummeted 7.55%, the Shenzhen Composite Index and the ChiNext Index both plummeted by more than 8.5%, and more than 1500 stocks in the two markets hit the daily limit.

For the first time in history, A-shares completed the closing task before 3 pm. It was also the first time that everyone witnessed the grand occasion of all market indexes hitting the limit down.

When the Shanghai Composite Index hit the limit down, trading came to an abrupt halt at 1:33.

Inside and outside the market, all investors who were paying attention to the stock market had expressions of extreme shock on their faces. Even many retail investors who did not understand the market circuit breaker mechanism stared at the completely still market, their hearts chilled and their eyes confused.

(End of this chapter)