Starting with a fully invested A-share portfolio to become a capital...

Chapter 106 Market Analysis, Failed Shipment

As 9:15 AM approached, both the Shanghai Composite Index and the Shenzhen Component Index opened sharply lower.

The Shanghai Composite Index closed at 2663.77 yesterday and is currently at 2631 points, down 1.23%.

The Shenzhen Component Index closed at 10294.37 yesterday and is currently at 10179 points, down 1.12%.

Those who frequently compare the two major indices know that the Shanghai Composite Index rarely experiences a larger decline than the Shenzhen Component Index.

This is because the Shanghai Composite Index is mainly composed of traditional industries, such as finance, industry, and energy. These sectors have large market capitalizations and relatively stable fluctuations.

The Shenzhen Component Index focuses on 500 stocks listed on the Shenzhen Stock Exchange that have large market capitalization, good liquidity, and high growth potential, such as those in the electronics, consumer, and biopharmaceutical sectors. These sectors are affected by policies, technological advancements, and market sentiment, resulting in high stock price elasticity and making them more prone to significant price fluctuations.

Due to the explosive popularity of the H1N1 flu concept, market funds have focused on biopharmaceuticals, and investment trends have shifted from value investing of "buying good stocks, being a good person, and getting good returns" to "hot theme stocks".

Jianfeng Group hit the daily limit.

Hualan Biological Products Co., Ltd. hit the daily limit.

Da An Gene hit the daily limit.

Haiwang Biotechnology hit the daily limit.

Stocks even remotely associated with the "H1N1 flu" concept have seen significant price increases, indicating a growing concentration of market funds.

Meanwhile, the blue-chip stocks that were abandoned, such as the four major banks, saw a significant pullback. The Industrial and Commercial Bank of China, which closed at 4.35 yesterday, is now priced at 4.27 yuan, a drop of 1.87%.

The sell-off of bank stocks led to a sell-off of other blue-chip stocks, with funds flowing into the Shenzhen Component Index, which is concentrated in "biopharmaceutical" stocks. This resulted in the Shanghai Composite Index, at 2600 points, falling more than the Shenzhen Component Index, which is at 10000 points.

Zhang Yang opened the intraday chart of Jianfeng Group, and unsurprisingly, it hit the daily limit up.

He then clicked on Rhine Biologics, which, unsurprisingly, also hit the daily limit down.

Meanwhile, on the other side of Eastmoney, in the comments section of Rhine Biologics, all that was left for shareholders were to send their greetings to Xu Xiang and wail in anguish.

[Your Sunshine Bro]: Xu Xiang, let me out! I'm done playing! Let me out! I'll kowtow to you, Brother Xiang!!
[Bathing Emperor]: I can't do it, I really can't do it, Xu Xiang, damn it, let me out!

[Tianfu Xiaosheng]: I only entered the stock market for three days and I was hit by Xu Xiang's one-word sword, losing 28,000 yuan. My dad said he would break my legs if I played the stock market again. Luckily it wasn't my hands, otherwise I wouldn't be able to enter stock codes and trade stocks.

[Xiao Student]: Teacher Da Xiao said that buying good stocks and being a good person will bring good fortune. Instead of buying good blue-chip stocks, you went to speculate on hot topics and lost money, didn't you? You deserve it!
With the battle for the title of "leading shikimic acid producer" coming to an end, it is no exaggeration to describe the shareholders of Rhine Biologics as being in dire straits.

Two days of limit-down openings, and another day of a dramatic market crash, leaving investors trapped with no way to escape, because any buy orders would be prioritized for execution by speculative trading accounts.

As soon as the market opened at 9:30, both major indices immediately plummeted.

The banking, securities, and energy sectors all fell by more than 2%, and the Shanghai Composite Index also fell by more than 2%, and is still searching for a bottom.

However, at 10:12, the Shanghai Composite Index rebounded and rose.

The simultaneous reversal of the intraday trend line and the average price line caused the decline to gradually narrow, and the price successfully recovered to within 1% by 11:12.

Just when it seemed like a strong recovery was underway, another small piece of news broke in the market at noon.

1. It is rumored online that the government has requested adjustments to the steel industry structure and the elimination of outdated production capacity.

2. Fiscal revenue from January to April fell short of expectations.

Two unverified market articles caused the FTSE China A50 futures index, listed in Singapore, to plummet.

Do not!
It's not high-altitude diving!

To be precise, it's underwater diving!

The FTSE China A50 Index, which had already fallen by 1.2%, plunged straight to 3%, creating a perfect "diving line".

All of a sudden.

The market is in a state of panic.

[Small Investor]: Who on earth posted this nonsense? It's going to kill people! Index futures are plummeting!
[Thunder Bro]: Lin Bei, you're spreading rumors, I'll fuck your mother! Our economy is clearly recovering, the manufacturing PMI has even returned to above the expansion/contraction threshold, anyone who believes that is an idiot!
[A Big Ham]: It's ruined. The A-shares market finally managed to recover, but then bad news came out at noon, and it's bound to plummet in the afternoon!
……

Zhang Yang, who was far away in Hangzhou, found a restaurant in Northeast China. After having a simple meal, he returned to the vice president's office and was about to rest when he inadvertently saw two short essays circulating in the market.

"Adjusting the steel industry structure and eliminating outdated production capacity—outdated production capacity, by which we mean..."

Zhang Yang thought for a moment, then muttered to himself, “2009 marked the beginning of the ‘4 trillion yuan investment plan.’ Real estate, highway and railway construction all require a large amount of steel, so there will be no oversupply in the short term.”

"But if the market is indeed involved, the higher authorities' requirement to adjust outdated steel production capacity should be aimed at achieving high-efficiency output and eliminating outdated equipment that is heavily polluting and energy-intensive."

For the past few decades, China's primary goal has been to develop the economy and ensure that its people have enough to eat and wear.

However, this comes at a price: in order to respond to the call, local governments encourage local businesses to produce at full capacity, without any regard for the damage to the environment.

It wasn't until China joined the WTO that it took over low-end manufacturing orders that the US and Europe didn't want, completed its first industrial capacity upgrade, alleviated economic problems, and gradually gained attention for environmental issues.

Laws and regulations such as the Air Pollution Control Law, the Production Safety Law, the Energy Conservation Law, and the Cleaner Production Promotion Law have been repeatedly mentioned in recent years, but with little effect.

This market analysis is a short-term negative for the steel industry, but a long-term positive.

why would you say so?

Steel companies are notorious for their intense competition.

If the government does not intervene, which steel company, such as Taiyuan Iron & Steel, Baosteel, or Ansteel, would be willing to reduce its production capacity first?
However, with the government's strong intervention, they were able to upgrade their production capacity and continue to start on the same footing.

"You could try buying some steel."

Zhang Yang didn't care about the authenticity of the market's writings; he only needed to observe whether there was any panic selling after the market opened in the afternoon.

If so, intervention can be carried out.

If not, then remain inactive.

Because if it is later proven that the market speculation was fake, the funds that fled could potentially be repurchased.

But if it's true, according to Zhang Yang's analysis, this is a long-term positive, and the government is intentionally adjusting the structure of the steel industry, so his intervention now is not too late.

This is the game in the A-share market; behind the news lies a game of human nature and cognition.

Value investing?
does not exist at all!

As for the news that "April fiscal revenue fell short of expectations," anyone with a little economic common sense and who follows the news knows that in order to cope with the economic downturn, the government has introduced a series of tax and fee reduction measures, value-added tax reform, and raising the personal income tax threshold.

In addition, the current price level is still low or even negative, and the slowdown in the growth rate of fiscal revenue calculated at current prices is entirely within the expectations of major institutions.

Of course, financial institutions know the reasons, but they won't tell retail investors; instead, they'll use this information to exploit them.

Zhang Yang speculated that these two short essays might have been released by an organization.

……

The market will open at 1 p.m.

Steel stocks such as Taiyuan Iron & Steel, Baosteel, and Angang Steel all fell, dragging down the banking, financial, and consumer sectors as well.

The Shanghai Composite Index and Shenzhen Component Index, which had finally stabilized, began to turn downwards. At 1:32 PM, the Shanghai Composite Index fell to 2610.34 points, seemingly about to break through the 2600-point mark.

Taking advantage of this opportunity, Zhang Yang bought 50 shares of Angang Steel at 9.91 yuan per share and another 50 shares of Taiyuan Iron & Steel, at a cost of 6.82 yuan per share. Why did he choose Angang Steel and Taiyuan Iron & Steel?

Very simple.

They are all Shenzhen-listed stocks.

Due to the hype surrounding the "biopharmaceutical" concept, market funds are now concentrated in the Shenzhen Stock Exchange, providing strong market support for the Shenzhen Component Index.

Although Baosteel and Baogang are the leading steel companies by market capitalization, they are listed on the Shanghai Stock Exchange and are easily dragged down by the overall market.

After buying steel, Zhang Yang added another 50 yuan to his position in an on-exchange ETF fund focused on environmental governance.

He's been traveling a lot lately and hasn't had time to manage his individual stocks, so he's had to buy ETFs to bet on their appreciation.

One advantage of buying exchange-traded ETFs is that you only need to anticipate the macroeconomic trends and follow the established patterns to make money in the market.

Don't understand candlestick charts?
Don't understand MACD?

Don't understand the relationship between quantity and price?

Don't understand financial statements?

It doesn't matter.

When buying exchange-traded ETFs, you only need to correctly predict the general trend.

For example, when the "4 trillion yuan investment plan" was launched, if you realized that the infrastructure and real estate sectors were about to take off, you could buy some shares of related sectors and wait for the returns to come in.

However, exchange-traded ETFs also have a drawback: their gains tend to be lower than those from buying individual stocks.

……

And on the other side.

Dark clouds shrouded Ningbo City, and thunder rumbled through the sky.

Large raindrops fell from the clouds, then were whipped up by strong winds, pounding against the windows of the VIP room on the fourth floor of Galaxy Securities on Jiefang South Road.

Inside the VIP room, the white smoke rising from the flickering cigarette smoke lingered under the cool lighting, like an unyielding sorrow.

Xu Xiang, Sun Guodong, Ma Xinqi and others sat at their respective trading positions, staring silently at the 32 lots of unsold sell orders.

Rhine Biologics' capacity to take on the project was far weaker than they had imagined.

Based on their past experience, they predict that they can sell at least half of their Rhine Biotech shares today and break even.

The ideal was lofty, but the reality was harsh. As of 14:21 PM, they had only sold 8 lots of Rhine Biologics, and there were still 32 lots that no retail investors had come to take over. This made the atmosphere in the VIP room silent and oppressive, like a pressure cooker that was about to reach its limit and could explode at any moment.

"hiss--"

"call--"

Sun Guodong took a deep drag of his cigarette, then exhaled heavily, breaking the silence, and said, "At the current rate of shipment, we may have worked for nothing, and may even lose a million or so."

"The absorption capacity was indeed a bit weak; the funds used to speculate on shikimic acid were all with the Jianfeng Group," Ma Xinqi echoed.

"That guy with the Shadowless Kick went on vacation after causing trouble. I hope I don't find him, or I'll beat him up."

"Not just beat him up, he should be slapped!"

"I'll just stab him!"

The speculators from the Ningbo Daredevil Team were making threats, glancing occasionally at Xu Xiang, who remained silent to the side, as if trying to gauge his attitude.

At this moment, Xu Xiang held a thin Zhonghua cigarette between his right index and middle fingers, the smoke rising between his fingers as he looked at the more than 30 sell orders on the computer screen with a complicated expression.

When was the last time a shipment failed?
He forgot.

It seems like it was 2 years ago?

It seems like it was 5 years ago?

He couldn't remember clearly; it might have been when he first entered the stock market and lost all his money. In any case, it was a long time ago, so long that he couldn't recall it.

Sun Guodong glanced around the VIP room, then stepped forward to bolster the low morale, saying, "Don't be so discouraged. Rhine Bio will release as much stock as we can. Da'an Gene has hit four consecutive limit-up days. Let's try our best to make it back from this stock."

This time, they learned from the failure of Rhine Biologics and not only took control of Da An Gene, but also made investments in several other listed companies with influenza testing capabilities.

The current concept of H1N1 influenza can be roughly divided into three hype points.

1 is shikimic acid.

Shikimic acid is an essential ingredient in oseltamivir, a synthetic influenza drug, and Jianfeng Group has been identified as the largest domestic supplier.

The market manipulators are public fund institutions, "A God" (a popular investment expert), and a large number of small and medium-sized speculative funds.

2 is the flu vaccine.

It is rumored that companies such as Hualan Biological and Fosun Pharma have obtained the original virus strain and are analyzing its gene sequence and viral proteins.

The person in charge of the deal was Zhang Jianping.

3 is influenza testing.

The main players in this hot sector are Xu Xiang, Sun Guodong, Ma Xinqi, and a group of speculative investors known as the "Lemon Daredevils." Their investments already include companies like Da'an Gene, Kehua Bioengineering, and Haiwang Bioengineering.

It's no exaggeration to say that the capital market is just waiting for the H1N1 flu to break out in Asia so that it can drive up prices significantly.

It's not just the Chinese stock market; countries like India, Japan, and South Korea are also speculating on the H1N1 flu.

As soon as Sun Guodong finished speaking, Ma Xinqi immediately chimed in, "Brother Sun is right, the market trend isn't over yet, there's no need to be discouraged."

"Brother Sun and Brother Ma are right, the rally isn't over yet, let's work hard to make our money back!"

"Keep it up, guys! Let's make it back!"

Let's work hard together to earn it back!

The gloom of the failed shipment vanished. Xu Xiang looked at his brother beside him, took a deep breath, and as his cigarette burned down to the filter, he casually shoved it into the ashtray, exhaling a heavy cloud of smoke.
"It's my fault with Rhine Biologics. I misjudged the situation. I'll talk to the institutions this weekend and try to get as much funding as I can in the next couple of days."

If no retail investors come to take over, it means that their expected return needs to change from making a profit to breaking even.

He believes that accepting failure is the beginning of making profits in the stock market, and he no longer dwells on it.

"I also have my problems. I didn't expect someone would actually dare to intercept the dragon, but that's all in the past. We'll focus on managing Da'an Gene and Kehua Bio well and then make a killing." Ma Xinqi also stepped forward to take the blame.

Sun Guodong smiled calmly and smoothed things over, saying, "Let's turn the page. Everyone has their problems. Let's go get a foot massage together after the market closes tomorrow. It's on me."

"Brother Sun is treating, I'll definitely go!"

"Speaking of foot massages, I know a newly opened foot bath shop that's having a promotion: recharge 500 and get 200 free, recharge 1000 and get 500 free. Isn't that a great deal?"

"This is great, we have to take advantage of this!"

(End of this chapter)