Zhang Yidong Talks About Making Big Investments In Equity Investments.

Transcript of Zhang Yidong's speech:

Thank you very much. I am very glad to have some exchanges with you and some prospects for the future. Recently, all of us are judging the top. Now everyone's anxious attitude is trying to prove that it is not too early by using one data. This mentality is too early. Many people feel that after finishing this wave, they rush to grab the money and finish the battle.

If so, many people are asking whether they want to get to the top. I would like to describe one of my judgments, because I need from my main logic, that is, from last year's view of the capital market, because the slogan logic is "used bull market", including mostly limited to the main board and gem, including three boards, four boards and so on. I think this is a big era of equity investment. If we start from this point of view, we may be a bit more relaxed. A shares in the stock market are not so important. But I think this time is more than just a year. My own judgment last year should be three to five years of bull market. With this direct financing to promote the transformation and development of the economy, this is a big background. Some time ago, I said something in a private occasion, and it was put up by others as a headline. It looked sensational.

The whole of China is an entrepreneurial type. You can regard China as a company. This company is an entrepreneurial and innovative type. It is not known whether it can bring balance sheet and profit statement in the end. However, such adjustment and change bring priority to a cash flow statement and revitalize assets. So the importance of this time is that equity investment is like a decade ago. At that time, it was a creditor's right, and creditor's rights is the logic of credit driven investment. The development of this debt is accompanied by the real estate industry. The real estate boom is in the middle of the big bull market. The real big money is not real estate, but it is real estate developers. Similarly, this round of making big money is not the two level market, it must be equity investment, and the second level is the two level market to invest. We should think about this matter in a big perspective. If we look at it too carefully all day, we will be too concerned about this short-term victory or defeat.

For the government and enterprises, I have just been from the perspective of entrepreneurs, he is actually using the entire equity market to add leverage, if he continues to take money from the bank or want to try to issue bonds. With debt financing, the balance sheet of the whole society is still deteriorating. This kind of leverage can not be reduced, and your entire assets can not be revitalized. In this context, we leverage resources to optimize the allocation of resources, especially in some manufacturing industries with low added value. Recently, we have seen through public offering and private placement to intervene in the capital market. Over the past decade, including the big bull market in 05-07, they did not come at all, because at that time industry, including real estate, was a bull market, and the stock market merely referred to a spillover effect of the whole economic boom, making the stock market a bull market of assets. The rest of the world is full of woes. The government tries to revitalize the stock market through multi-level capital markets, and entrepreneurs also integrate their main industries or industries that are not competitive. They start to maintain value and increase value through the capital market, and now they are involved in entrepreneurship.

When you didn't have the fundamentals to improve, you just said you had a dream, and then you were advocating the business model, so you put money into the capital market, which is a kind of nationwide entrepreneurship, and how to understand this bubble. That being the case, I think the bubble will be a long time. For example, the bubble is bigger, for example, buying 100 times suddenly and retracting it down to 40 times, all these can promote economic transformation. For the government, what he focuses on is not that ordinary people (603883) can get rich from here, and bad words become speculative. If there is no fundamental bubble constantly blowing, the final bubble will be even worse. From the government's point of view, he is looking forward to the longer and longer the bull market, until the new engine comes up, or until the economic crisis happens.

When we studied the strategy in 2012, we conceived that if there is a bull market, what kind of bull market it will be, we think it should be a bull market from 1996 to 2001. At the beginning of 96, 512 points rose rapidly. Although it had experienced twelve gold medals in the past 97 years and more than 1500 points in September, it entered two years of consolidation. Although the index did not look like a bear market, it was a big shock, but at that time, the stock market was very strong, and the government could also make use of it. By the time of 1999, the internal and external troubles of the United States and the bombing of our embassy were also the third stages of the new engine. This time, I think this market is likely to be the three stage. Last year to a certain stage of this year, I think it is the first stage. Recently, I wrote a report. I think the first stage has reached the climax, and this climax is accelerating. If the government is relatively mild here, it will continue to give power, to the subject matter, to some funds, and to continue to guide public opinion. If this situation is completely possible at 1 or 2 thousand points a month, it is a possibility of further acceleration. However, I am inclined to say that the government is now aware of the fact that the second stages of adjustment in the following period can be longer and longer.

In the first case, he increased the supply of chips on this side. Originally, the government should drive the capital market, drive the prosperity of multi-level capital markets, and drive a big development of direct financing. What's the purpose? His purpose is to promote the decline of social financing through direct financing. If we start from this core idea, we can see more supply of chips at the next stage, and I think this theory is not to see "530" simple and brutal administrative suppression. Because this is not the same as in 2006 and 2007, 06 and 07 years are economic prosperity. When the stock market is bubbling, other assets are also the same bubble, which is a great pressure on inflation. At that time, the control of the capital market bubble is actually a relatively big use of strength. This time, we believe that we mentioned last weekend that if we see this signal in the future, if there is such a signal of adjustment, there should be two signals on the left side and the right side. The signal on the left will change in a direction of public opinion, and the right side will be guided by this marginal change between the funds and chips. First, increase the supply of chips, whether it is IPO and refinancing to increase supply, this time from March to the current acceleration period is obvious, there are some catalysts, not just the government's top position, but also to the registration system time rhythm, and recently we see the new batch of new shares, the amount of financing is different from the overdue, so there will be an acceleration. If the government tries to make the bull market a bit longer later, he will choose the signal on the right side and the chips will increase the supply.

The government is the most reluctant signal to be seen in the capital market. I think it is an adjustment to the allocation policy. This time, I think it is not the standard of stamp duty, but the adjustment of capital allocation. He is equivalent to the real estate regulation, he is to protect the rigid demand, you are not afraid to use the principal, now the capital market is like the past ten years of real estate, are built on the bull market on the lever. When I was studying in 90s, I could buy a blue print account in Shanghai, and then zero down payment, 10% down payment, 20% down payment, and 30% down payment. He was actually a lever control. When you started a rhythm too fast, he had such a control, and then there were various taxes.

This time, we can see that the data in March, whether the balance of the customer's margin or the two fusion, is rising faster, but this is the tip of the iceberg, but we can see it clearly. Dark is not seen in the real estate trust, and more to the stock market, including the allocation of funds is also very huge. When we see that the biggest risk signal is the adjustment of the allocation policy, we should be very careful when we see this signal. This is what I have discussed from the main logic, and there are some adjustments in the whole future. How do we deal with it?

I believe that the whole three stages of this round will be defined in three to five years, that is 2018 and 2019. Before 2020, we should have a slight improvement in the transformation and adjustment of the economic structure. If there is no improvement, we may lose the best time window. In 2020, one is a comprehensive well-off society and the other is the completion of comprehensive deepening reform. More is the population structure and the aging of the population. From this point of view, we believe that the government's care for reform, innovation and entrepreneurship in the next few years is beyond doubt. So we feel very happy. From 90s, when our capital market was mixed up in the stock market, we felt that there was still a sense of reform in the spring. We seemed to see the kidnapping of the capital market by the government. Like real estate in the past decade or so, you can see that he is like a son, and can not help but fight, first good advice. The role of the capital market is that net financing can not be compared. If we still rely on banks and net financing to drive our development government, we will certainly do it. But our government is good at being flexible, pragmatic and pragmatic. Black cats and white cats can only catch mice. At this time, when the debt ratio of the whole society is viewed from the perspective of A shares, or from the government debt and the debt rate of non-financial enterprises, the development of capital market can only be revitalize by the merger and reorganization. I think 1996 to 2010 is very similar. Under this economic background, it is difficult to rely on endogenous growth. The traditional industries are restructured to improve efficiency. The emerging industries are mergers and acquisitions. They rely on continuous M & A and cash flow through mergers and acquisitions. It is difficult for them to be reflected in the profit statement. But he constantly refinancing the profits. He has cash flow to buy capital or there is plenty of cash flow on the account, which is a huge role of capital market in the middle of this round of transformation.

For the economy, I think the micro industry is booming, the supply and demand of the entire labor force, the government is most afraid of the problem of labor and unemployment, but this time of economic downturn, the employment rate is not as positive as it used to be. This is related to the population structure, and is also related to the third industry's main contribution to the economy over the second industry.

For mobility, M1 and M2 are at a low level. At this time, they can provide a relatively low cost for the economy. In fact, it is to let the people in here take out the money, and are happy to come up with the money to provide various refinancing. This time, I really feel that I applaud the new system of the government. He has a hidden rule on the new shares. In the future, even the registration system is a registration system with Chinese characteristics. When he raised the funds in the new shares, there is no over subscription now, and there are 24 times the price earnings ratio of the regulations, leading to a good new stock will hide some profits, so after the listing, he wants to do things when he wants to buy and sell when he wants to finance. So in the past few months, we have been thinking that the new shares are a good opportunity.

For the overall development of direct financing, the realization of equity market And the economic benefits are long term, but the most beautiful time is this paragraph. I think it is the climax. The next month is the climax. Everyone will be in the mood this month. And if the month is adjusted early, let the market go a little slower, and the whole climax will go longer. But if this month is accelerating, frankly speaking, we need to be more careful in the middle of 5. Now is the most honeymoon time, because the money is coming, but the supply of chips has not kept up.

By the middle of May, we need to pay attention to several points, because the end of April is the first amendment to the securities law. Will it be added later?