This weekend's news was relatively quiet, with no major macro news. The three hot topics were the flu, the Beijing Stock Exchange (BSE), and the cooperation between Huawei and Changan Automobile. I originally thought that there would be no bearish news for the A-share market over the weekend, so today should have been quite calm, but as soon as the market opened, there was a force that dumped heavyweight stocks, causing the Shanghai 50 to dive and the Shanghai Composite Index to fall. At that time, the Hong Kong stock market was rising, and foreign capital was not dumping heavily, indicating that it was entirely domestic capital that was selling. However, the speculation on the BSE continued, with the Northern 50 Index once surging by more than 10%, and this is an index! Meanwhile, the A-share market, with the Shanghai and Shenzhen exchanges, felt bearish, while the BSE was in a bull market, which is puzzling.

To be honest, we believe that the morning dumping of heavyweight stocks was entirely emotional. The current economy has stabilized, and real estate policies are being accelerated, making it impossible for domestic economic expectations to get worse. However, the Shanghai 50 Index almost hit a new low during today's trading. In November, global stock markets were booming, with the US Nasdaq rising by more than 10%, but the three major A-share indices not only did not rise, the ChiNext Index even fell, due to the very weak performance of A-share heavyweight stocks, with all the funds speculating on topics, which then led to the emergence of a bull market in the BSE.

Advertisement

The A-share market is really peculiar: on one side is the BSE bull market, on the other side are the Shanghai and Shenzhen indices approaching new lows; on one side are the continuous falls of heavyweight stocks, on the other side is rampant speculative trading.

We believe there may be two main reasons for the morning dumping of heavyweight stocks:

Firstly, speculative trading in A-shares is rampant, and value investing has been repeatedly trampled on, and this split style has been taken to the extreme recently. Well-known influencers have teased that A-shares have become chaotic, with the valuation system failing and a large number of investors becoming confused. Therefore, these value investors who can't hold on have started to sell, with BYD being a typical example, affected by Huawei's intelligent driving impact on one hand, and accelerated selling due to value investors cutting their losses on the other.

Secondly, A-share regulation is somewhat confusing to investors. The BSE regulation seems relatively loose, and companies that have seen continuous surges in this BSE market have attributed the reasons for abnormal fluctuations to "normal market behavior," while the Shanghai and Shenzhen exchanges have strict regulations on short-term gains. The speculative trading in the BSE and the continuous falls in the Shanghai and Shenzhen exchanges have created a sense of disparity among investors.

As of press time, the Shanghai Composite Index has fallen by 0.78%, the ChiNext Index has fallen by 0.98%, the Hong Kong Hang Seng Index has fallen by 1.05%, and the Hang Seng Technology Index has fallen by 1.15%. The turnover of the two markets has slightly increased, and the net outflow of Northbound capital is 3.791 billion.

Looking at the industry breakdown, only four industries - coal, electronics, agriculture, forestry, animal husbandry, and social services - have risen, while media, real estate, retail trade, beauty care, and non-bank finance industries have led the decline.