That night, thrilling! US stocks plummeted by 7% to trigger a meltdown, and global stock markets fell sharply. Will A shares be a "safe haven"?
Black Monday!
US stocks melted.
The U.S. stock market fell sharply by 7% overnight, triggering the fusing mechanism. This was the second time that the U.S. stock market had a fusing.
With the fall of U.S. stocks on that day, the first trading day of the week, the global stock market could be described as a complete rout, coupled with the plunge in international oil prices, and the yield on U.S. Treasury bonds was inverted.
The second time in the history of US stocks
History is always amazing coincidence.
It was the famous "Black Monday" in 1987 that led to the US regulator's final determination to launch the stock index fusing mechanism. The first fuse in the history of U.S. stocks also occurred on "Black Monday" on October 27, 1997, and this time triggered the fusing again. Still happened on "Black Monday".
On Monday, the U.S. stock market suffered a sharp selloff. The S & P 500 index fell 7% quickly, triggering the first fuse mechanism, and US stocks were suspended for 15 minutes.
The so-called fuse mechanism refers to a series of price fluctuation limits based on a reference price.
Simply put, when the stock market falls to a certain extent, the market automatically stops trading for a period of time, which may be a few minutes, or it may be terminated throughout the day. The main purpose of this is to prevent the panic mood from further aggravating and bring greater impact to the market.
The motivation for the US to introduce the fuse mechanism was "Black Monday" in 1987. On October 19, 1987, the Dow plunged more than 500 points, a decline of more than 20%. Three months later, the fusing mechanism was approved and launched in October of the following year. The initial reference index was the Dow Jones Industrial Index.
In May 2012, the New York Stock Exchange adjusted the fusing mechanism. The main adjustments include: first, selecting the S & P 500 index to replace the Dow Jones Industrial Index as the fusing benchmark index; second, modifying the fusing threshold to 7%, 13 % And 20% third gear.
According to the US stock market fusing rules, when the S & P 500 index falls by 7%, the first level of fusing will be triggered, and the city will suspend trading for 15 minutes; if the decline is extended to 13%, the second period of fusing will be triggered, and the market will be suspended for another 15 minutes; To 20%, trading will be suspended until the next trading day.
This time, the U.S. stocks have not triggered the second gear blowout. After the resumption of trading, the three major US stock indexes basically fluctuated at a low level, and finally fell sharply. Among them, the Dow Jones index fell about 7.79%, the S & P 500 index fell about 7.6%, and the Nasdaq Composite Index fell about 7.29%.
The global stock market is "stable"
In addition to the U.S. plunge on Monday, other major global stock markets also suffered heavy losses.
In terms of European stock markets, the British FTSE 100 index fell 7.69%, the French CAC40 index fell 8.39%, the German DAX index fell 7.94%, the Greek Athens ASE index, and the FTSE Italy MIB index fell more than 11%.
In terms of Asian stock markets, China ’s Shanghai Composite Index fell more than 3% and fell below 3,000 points; Hong Kong ’s Hong Kong Hang Seng Index closed down 4.23%, the largest one-day drop since 2016; the Nikkei 225 Index closed down 5.07%, creating a stock market in the past three years The largest one-day decline; the South Korean Composite Index fell 4.19%, the largest one-day decline since 2012. The market indexes of Singapore, India, Indonesia, the Philippines, and Vietnam all fell more than 5%. Thailand's SET index fell more than 7%, the highest drop since the financial crisis in 2008.
Galaxy Securities analyst Xu Dongshi said that the sharp drop in global stock markets on Monday was mainly due to the dual pressure caused by the spread of the new crown pneumonia epidemic and the plunge in oil prices. Especially considering that the outbreak has impacted world economic growth, and further lower crude oil prices will bring deflationary risks to the world, which has exacerbated investor panic.
Recently, due to the failure of the Organization of Petroleum Exporting Countries and non-OPEC oil producing countries headed by Russia to agree on crude oil production policies after the end of March this year, international oil prices have fallen in a panic. On March 9, international oil prices plummeted, with a drop of 30% at one time, the largest one-day drop since the Gulf War in the early 1990s. Among them, the price of Brent crude oil dropped to 31.02 US dollars per barrel, WTI crude oil (US West Texas Intermediate crude oil) fell below 28 US dollars per barrel.
Li Qilin, chief economist of Yuekai Securities, also said that the big drop in the global stock market on that day was mainly due to the spread of overseas epidemics and the collapse of crude oil, which dampened investors' risk appetite and caused the already very fragile emotions to collapse, plus the index Boosted by fund and programmatic transactions, trampled on liquidity. Take US stocks as an example. The decline in crude oil prices itself has hit the US manufacturing companies, especially the energy industry. The decline in oil prices has also cast a shadow on the total demand of the real economy.
U.S. stock bull market ends?
Affected by the slump in crude oil prices, US Treasury yields fell to a record low, and yields across the board reached a record of less than 1% for the first time in history. The yield on 10-year U.S. Treasury bonds penetrated 0.5% downward, which was the first time this happened in history, refreshing a record low of 0.707% set on Friday. The yield on US 30-year Treasury notes fell below 1%.
Yang Delong, chief economist of Qianhai Open Source Fund, said that the sharp decline in the yield on U.S. Treasuries represents an extreme reduction in investor risk appetite and the pursuit of fixed-income products such as bonds, which has once again put pressure on U.S. stocks. In fact, after a 10-year bull market, the valuation of US stocks has been at historically high levels, pressure on profit-taking is high, coupled with the diminishing margin of the effect of the Trump administration's tax cuts, and the European economy is on the verge of recession, so the end of US stocks The conditions for this round of bull market are already in place. It can be said that the probability of US stocks peaking has become higher and higher.
Some foreign investment banks are also pessimistic. Morgan Stanley believes that U.S. stocks will continue to fall until the Federal Reserve launches new interest rate cuts and easing plans (QE). Morgan Stanley analyst Michael Wilson pointed out that the US stock market that opened in the fourth quarter of last year rose sharply, from a driving perspective, more from liquidity than fundamentals. At present, it is not enough to just see the potential damage to the stock market caused by the new crown pneumonia epidemic.
Michael Wilson believes that the current economic shocks in the United States also include: fiscal stimulus has caused U.S. companies to face cost problems and profit pressure; the Federal Reserve began an aggressive monetary tightening cycle in 2017 and 2018, and its negative effects began to appear two years later; The trade policy pursued has caused many uncertainties in the world trade situation. The US economy is currently at the end of the expansion cycle, so any unfavorable factors may increase market panic. This also explains why the market is responding so strongly to the new crown pneumonia epidemic.
Xiang Weida, chief economist of Great Wall Fund, is not so pessimistic. Xiang Weida believes that although there may still be a certain period of adjustment for U.S. stocks, there are no major problems in the fundamentals of the U.S. economy, and in a new round of industrial trends, including the new generation of information technology and new energy vehicle technology represented by 5G, Both have competitive advantages; with regard to the impact of the epidemic, as US officials attach importance to it, it is believed that it will also be controlled, and investors need not worry too much.
Has A-share become a "safe haven" for global funds?
In view of the future trend of A-shares, most analysts believe that short-term A-shares are difficult to stand alone, but in the long-term, it is expected to get out of the independent market.
Hong Liang, an analyst at Galaxy Securities, believes that there will be some adjustment pressure on A shares in the short term, but the downside is expected to be limited. Taking into account that the current policy tone of China's official steady growth has not changed, the loose liquid market environment and counter-cyclical control policies will continue; In addition, as China's new crown pneumonia epidemic is gradually effectively controlled, enterprises resume work and production gradually, and domestic demand consumption gradually The recovery of China's economy can be expected; coupled with increased external risks, it will also highlight the allocation value of the A-share market and is optimistic about the medium- and long-term investment opportunities in the A-share market.
In this regard, Xia Fengguang, a futures fund manager of private equity rankings, also holds similar views. Xia Fengguang believes that the continued slump in overseas markets on Monday and the historic plunge in the crude oil market are due to concerns about the global recession cycle. This sentiment has also affected the A-share market and a large outflow of funds from the north. Domestic consumption has been more severely affected by the epidemic. Now the impact of overseas markets has caused investors to worry about exports. After all, it is difficult to ensure that the GDP growth rate does not show a significant decline.
However, we must also see that with the gradual effective control of the epidemic in China, domestic monetary and fiscal policy reserves must be more adequate, and the position and valuation of A shares are not exactly the same as those of U.S. stocks. Volatility and pessimism on the A-share market outlook.
Zhang Yidong, chief strategy analyst of Industrial Securities, also said that in the short term, A-shares still face the pressure of adjustment in the "cold spring." . It is expected that in 2020, the U.S. stock market is most likely to be a bear market (a drop of about 20%) or a volatile market (a rise or fall of about 10%), while a big bear market with a decline of more than 30% and 40% is still a small probability. It is also a small probability.
In the medium term, Chinese assets have a safe-haven effect, and A shares are expected to emerge from the independent market. Basically, China's stimulus policy has more space and execution power. On the capital side, the Chinese stock market is actively attracting long-term funds. It is expected to achieve a virtuous cycle of two-way expansion of investment and financing in the medium term, which will help the bull market.