On February 6, ** Huijin Company said that it has recently expanded the scope of exchange-traded open-end index ** (ETF) holdings, and will continue to increase its holdings and expand the scale of its holdings.
Recently, some economists and institutional analysts believe that the time has come for the equalization of the market and hope to further improve the Chinese version of the leveling system to boost market confidence.
Leveling, also known as intervention, is generally an investment base established by specific institutions (such as regulatory authorities, financial departments, etc.) in a statutory manner, with the purpose of achieving market correction through reverse operation in the secondary market, so as to stabilize the market.
On February 5, the team led by Wang Daji, chief analyst of Guotai Junan's active allocation, pointed out in a report released that the leveling standard is usually set up when the market is facing a major crisis or extreme volatility, and stabilizes the market by injecting liquidity into the market to restore market confidence and prevent the market from further **, and protect the economy from further damage.
Yang Qinqin, an analyst at Huaxin, said in a previously released research report that the leveling of ** funds mainly includes **, banks, ** companies, insurance companies, trust companies, listed companies, etc. The assets entering the market mainly include blue chips, bonds and ETFs. Generally speaking, the duration of the leveling standard is more than one year, and it is usually delisted when the company is in a certain profit to avoid damaging the stability of the company.
Chen Guo, chief analyst of the strategy of China Securities Construction Investment, and his team pointed out in the latest research report that medium and long-term funds such as Pingzhun ** need to find low-valuation, high-quality, and suitable for long-term large-scale equity targets to invest in A-shares.
For the suitable scale of leveling, CITIC ** research analysis saidCombined with market practice, the scale of leveling** is mostly between 3% and 6% of the total market capitalization.
For the implementation effect of leveling, Wang Daji said that it depends on its operation mode, scale, entry timing and other relevant policies. In the short term, leveling** can effectively stabilize the market and restore confidence, and prevent excessive stock prices**。But in the long run,The implementation effect of leveling ** depends on economic fundamentals. When the economic fundamentals are not ideal, it needs to be supplemented by other relevant policy support to effectively reverse the market trend.
Guotai Junan pointed out in the report that the specific situation and measures of each country or region are differentBut the common goal is to restore market confidence and prevent the market from going further, through the intervention of financial institutionsIncluding the market intervention after the outbreak of the subprime mortgage crisis in the United States in 2008, the market intervention after the bursting of the asset bubble in Japan in 1995, the bursting of the bubble in South Korea in 1990, and the financial defense war in Hong Kong, China in 1998
United States – The Dow Jones and S&P 500 responded to the 2008 subprime mortgage crisis in the wake of the 2008 subprime mortgage crisis. In response to the financial crisis, the United States decisively came to the rescue. Specific actions include the Federal Reserve's use of special authorization to provide an emergency loan worth $85 billion to the AIG; The Federal Reserve and the top 10 U.S. banks jointly set up a $70 billion bailout** to support financial institutions on the verge of bankruptcy; The U.S. Treasury Department further implements a $250 billion capital purchase program for preferred equity interests in banks and financial institutions to stabilize the banking sector, among other things.Guotai Junan pointed out that the level of ** tends to buy important ** that can significantly affect market sentiment and the index, especially in the market irrational period**. In addition, Equalization** also uses other financial instruments, such as ETFs, to achieve its objectives, depending on factors such as the economic situation, market structure, and policy objectives of each country or regionFrom this point of view, the US bailout fund is not a leveling fund in the form of a first-class fund in the traditional sense, but more like a "quasi-leveling fund" that includes a package of bailout measures, which is also aimed at restoring market confidence and stabilizing the market.
Japan – four cases since 1941
1941-1951: During World War II and after the war economic recovery, in order to prevent the war from having a significant negative impact on Japan**, Japan** established Nippon Cooperative ** Company in 1941 to engage in the operation of stabilizing stock prices. After the war, in order to prevent violent fluctuations from hindering post-war economic reconstruction, Japan established an investment trust in 1951 to iron out the sharp fluctuations in stock prices.
1964-1971: Economic downturn and market adjustment. From April 1963 to July 1965, Japan** fell sharply under the dual pressure of Japan's economic downturn and the United States' increased taxes. During this period, Japan has twice established a level standard for bailing out the market. First of all, the Japan Commonwealth, which was established in January 1964, was backed by 14 banks and four major ** companies, with a capital scale of 190.5 billion yen. In 1965, the Japan** Holding Consortium, led by the Japanese industry, was established with a capital of 322.7 billion yen to provide market support.
1995: Market intervention after the bursting of the asset bubble. In the first half of 1995, against the backdrop of Japan's continued economic downturn, the Nikkei 225 index went from nearly 30% near 19,000 points** to around 14,000 points after the impact of the Hanshin Great**. So,In June of the same year, Japan's ** organization of the banking industry established **Stability**, and invested about 2 trillion yen to prevent ** from falling further.
After 2010: Japan's ** bailout measures were more direct, the Bank of Japan directly entered the market, and began to buy exchange-traded **ETFs through trust institutions), the investment scale once reached 1 trillion yen, while maintaining stability, a large amount of liquidity was released.
In 2012, after Haruhiko Kuroda became governor of the Bank of Japan,The Bank of Japan has further stepped up its entry into the market。In particular, after the outbreak of the epidemic, the Bank of Japan announced that it would double the upper limit of the annual new balance of stock index ETFs to 12 trillion yen, and in just one month in April 2020, the purchase scale was close to 15 trillion yen ETFs.
United States: ** Equity in financial institutions. During the 2008 financial crisis, U.S. financial institutions suffered heavy losses. The rescue measures in the United States are also mainly aimed at financial institutions, including the purchase of financial institutions**, loans to financial institutions, and the purchase of non-performing assets of financial institutions.Guotai Junan pointed out in the report that the implementation effect of the level standard depends on its operation mode, scale, entry time and other relevant policies. In the short term, leveling** can effectively stabilize the market and restore confidence, and prevent excessive stock prices**However, in the long run, the effect of the implementation of the leveling depends on the economic fundamentals. When the economic fundamentals are not ideal, it needs to be supplemented by other relevant policy support to effectively reverse the market trendFor example, on September 7, 2008, the United States** announced that it would seize control of Fannie Mae and Freddie Mac (the "two houses").Specific proposals include the acquisition of senior preferred shares issued by Two Houses, the provision of a special line of credit to Two Houses, and the acquisition of mortgage mortgages issued by Two Houses**
In September of the same year, the Federal Reserve bailed out the AIG with $85 billion in loans because it was "too big to fail." In exchange, the United States** gets AIG799% equity.
dayBen: Before 2010, it was mainly **, and after that, it was mainly ETFs.
Before 2010, Japan's rescue measures were mainly based on buying**, and after 2010, it was mainly buying ETFs. For example, in 1964, Japan bailed out the market by overselling the constituents of the stock index.
In 1965, Japan's holdings continued to bail out the market, mainly through constituent stocks. In 2010, the Bank of Japan (BOJ) went directly into the market to buy ETFs. As of January 2024, the size of the BOJ's holdings of ETFs has reached 372 trillion yen, far more than 019 trillion yen.
South Korea: Structuring portfolios or ETFs that track stock indices.
In 1990, South Korea's **stable** mainly bought**, and the targets were mainly large manufacturing enterprise stocks, financial stocks, etc.**This in turn constructs a portfolio that tracks KOSPI, containing about 50 to 60**.
In 2003,South Korea Stable buys representative Korea's stock index products to build a portfolio that tracks KOSPI and KOSDAQ。Similar to 2003 in 2008, South Korea **stable** invested in KOSPI (80%) and KOSDAQ (20%) weighted index-tracking portfolios. In 2009, the proportion of investment funds used to track KOSDAQ in South Korea*** was raised to 30% in July 2010 and further to 40% in December 2010. Stable, which was established and not actually executed, would have invested in ETFs that track indices such as the KOSPI200.
United States: Decisive and effective. During the financial crisis, the rescue measures of the United States** effectively alleviated the panic in the financial market and restored market confidence. At the end of 2008, major U.S. stock indexes began to bottom out and rebound, entering a new round of long-term slow bulls.Guotai Junan's report said that a leveling** exit mechanism is essential to ensure the long-term health of the market and reduce market distortions. It is true that the exit rhythm of different countries or regions is different, but they will basically choose to exit when the market trend is stableThe common goal is to slowly reduce the market's dependence on the rescue and restore the normal operation of the marketAt the same time, try to invest the funds during the bailout:
Japan: The long-term effect is not ideal.
The overall rescue effect of Japan's leveling ** is not ideal. At first, in 1964, when Japan jointly raised more than 190 billion yen to save the market, due to the relatively limited scale of funds and the fact that Japan's economic fundamentals did not improve significantly at that time, it continued to decline after a short period of rapid recovery. It was not until 1965 that Japan's ** retention portfolio entered the market, and ** stabilized. During the Japanese stock market crash in 1995, the market began to stabilize after Japan's **stable** entered the marketHowever, due to the long-term weakness of the Japanese economy, it returned to the downward range after a year.
South Korea: The effect of the bailout is gradually improving.
In May 1990, the Korean Stability was launched to overcome the Korean downturn that began in April 1989. However, after entering the market, it failed to stop the trend of South Korea
After the guaranteed stock price launched in September, it only stabilized for a short time, and then fell into a trend again. The main reason was that the Korean economy was in a downward cycle at that time, and the stock price could not be effectively reversed
In contrast, in 2003 and 2008, South Korea's stable bailouts were significantly better than in 1990, successfully bringing South Korea into a 2-4 year long bull. The main reason is that with this leveling bailout, South Korea has supported a series of other policy measures, including the use of expansionary fiscal policy, restricting short selling, and injecting liquidity into the market.
In addition, during the 2008 bailout, Korean institutional investors also played an important role. For example, in the two months of September and October 2008 alone, the value of pensions such as NPS in South Korea was net 524 trillion won**.
United States: Duration of approximately 4 years. After the market stabilizes and financial institutions resume normal operations, the United States exits by gradually, holding shares in financial institutions. From the successful bailout in 2009 to March 2012, the U.S. took out all home mortgages** and made a profit of $25 billion. During the entire bailout process, the exit process lasted 3 years, and the total duration was about 4 years.The views in this article are mainly from Guotai Junan Research Report, "Ordered in Danger: The Overseas Experience of Leveling the Best", analysts Wang Daji (s0880522080007) and Guo Jiaojiao (s0880523070002) Wall Street have been abridged.Japan: Duration of about 4-9 years.
Japan's leveling** exit cycle is longer. Founded in 1964, the Japanese Kyo** was dissolved in 971, with a total duration of 7 years and a cumulative profit of 70 billion yen.
Founded in 1965, the Japan** Ownership Group was disbanded in 1969 and lasted for four years, with a cumulative profit of 50 billion yen. In addition, Level**, which was established in 1995, has experienced a longer duration, with an average total duration of up to 9 years.
South Korea: Duration of about 4-7 years.
The exit process of Korea Equal** reflects the consideration of caution and market trends. Founded in May 1990, Stable began to withdraw from the end of 1993 and ceased operations until May 1996, with a withdrawal process that lasted nearly three years and a total duration of six years.
Founded in 2003, Stable began to sell in 2006 and ceased operations in August 2007, with an exit process that lasted nearly 2 years and a total duration of more than 4 years. Founded in 2008, Stable ceased operations in March 2012 and lasted less than four years.
Overall, the exit strategy of South Korea's Pingzhuun** usually takes advantage of the market to smoothly ** shares, ensuring a smooth transition of the market.
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