I would like to make a few additional comments on the part about stock repurchases in last night’s article.
There are two main purposes for a listed company to repurchase its stocks. One is to cancel the shares, which will increase the rights and interests of all remaining shareholders and is the best option. The other is to distribute the repurchased shares to employees as equity incentives. This type of repurchase will still be thrown back into the secondary market, and from the perspective of boosting stock prices, it is completely incomparable to cancelling shares.
Most of the U.S. stock repurchases are of the first type. For example, Apple had a total of 26.3 billion shares 10 years ago. After years of repurchase, cancellation, repurchase, and cancellation, there are now 15.2 billion shares left, and 42% of the shares have been cancelled. This is an astronomical figure that is difficult for ordinary people to understand. Let me give you a more popular example. If the cancelled shares are converted into market value, it is roughly equivalent to 1/4 of the total market value of A shares.
Some readers still cannot understand why dividends are beneficial to major shareholders, while buybacks are beneficial to small shareholders. I will not analyze the logic, let's talk about the most basic behavior path. Have you ever deliberately withdrawn the stock dividends you received from A-shares over the years? Each time it's just a few hundred or a few thousand, it's not noticeable at all. 99.99% of retail investors just merged it into the principal and continued to speculate. So the dividends distributed to retail investors eventually flowed back to the stock market.
However, the money distributed to major shareholders is much larger, tens of millions or even hundreds of millions at a time, and they withdraw the money directly and leave the market without buying more stocks. This is the same in A-shares, whether it is the boss of a private enterprise or a state-owned institution, they all withdraw the money they receive and almost never give back to the stock price.
Therefore, the result of dividends is that most of the money leaves the stock market, and a small part of the money remains in the stock market. If it is a buyback, it is different. Most of the money remains in the stock market, because there are many restrictions on major shareholders wanting to sell stocks, and it is more difficult to cash out.
Finally, let me compare the data of the Chinese and American stock markets in this regard. In 2023, the US stock market paid out a total of more than 770 billion US dollars in dividends and repurchased more than 1.26 trillion US dollars. In 2023, the A-share market paid out a dividend of 2.24 trillion US dollars, and the repurchase amount was only 91.4 billion US dollars.
From the comparison of these two sets of figures, you can feel that there is a big difference in the tendency of profit distribution. There is a reason why the US stock market has risen for 80 years. They have achieved transparency and fairness in the mechanism of profit distribution. A-shares were designed from the beginning to be a water intake pool, not a reservoir. Now all the leeks at home and abroad have awakened and stopped pouring water in. Those big straws are so thirsty that they even suck the water of the government troops.
……
Today, the A-share market experienced a bottoming rebound, regaining 2,700 points, but even so, today's trading volume was only more than 470 billion, ranking third from the bottom this year. Now there is no volume when the market goes up or down, and most people are just playing dead in despair and are unwilling to get involved in the market.
The market median was -0.87%, and most individual stocks were still performing poorly, especially in the morning when the Shanghai Composite Index was hovering around 2,700 points, and most individual stocks were already bleeding.
Many people have left messages asking me when this will end. Now I don’t even dare to say comforting words. In fact, all our judgments about the future as old stock investors are based on two systems. One is to look at our own history and find patterns, and the other is to look at the history of other countries’ stock markets and find patterns. However, the current A-shares neither conform to the history of others nor to our own previous history. Once we are completely separated from the experience system, predicting the market becomes pure metaphysics.
What we can hope for now is that after the U.S. dollar rate cut, global currencies will also follow suit and the RMB rate will be cut again, leaving more cash flow for ordinary people to support consumption. The results will be announced at 2 a.m. Beijing time on Thursday, and then we will see whether it will be cut by 25 basis points or 50 basis points.
As I write this I recall that many people left messages yesterday, still asserting that interest rates will definitely not be cut. Their reason is that China will not cut interest rates unless the United States completely explodes. Some even tried to find me for a betting website, saying that they wanted to make more than 100 times the profit based on their own knowledge.
I really...
The only bright spot today is the lithography sector. In recent days, Europe and the United States have tightened their blockade of chips against China. Every time there is a tense situation outside, the domestic lithography sector will rise for a few days, but this thing is not sustainable. Every time it takes advantage of the nationalist chicken blood, it will fall back quickly. The A-share lithography index has fallen by 32% this year. It is unrealistic to rely on them to rise suddenly.
……
1. The merger plan of China Shipbuilding and China Heavy Industry has come out. Each share of Heavy Industry can be exchanged for 0.1335 shares of China Shipbuilding. The closing price of Heavy Industry before suspension was 4.98, and that of Shipbuilding was 34.9. According to this exchange rate, Heavy Industry has a 6.8% premium. I feel that this plan is not very friendly to the shareholders of Heavy Industry. I thought that according to the convention, the absorbed party would have more benefits. If it were a bull market, both sides would have risen a lot. Now the market is too bad, and all the news is useless.
2. Wen's shares plan to repurchase 900 million to 1.8 billion shares. The company's stock price has fallen so badly. Pork prices are clearly rebounding, and profits are also rebounding, but the stock price has fallen so much that it seems like the company is going bankrupt.
3. Today, Sinopec repurchased 21.1 million shares, which is the first purchase in this round of repurchase. The total scale of this round of repurchase is 800-1.5 billion. Considering the overall scale and profitability of Sinopec, it should not repurchase so little. Last year, it distributed more than 40 billion in dividends, but now it will repurchase only 1.5 billion. It is just perfunctory to the market with a few melons and dates, which is back to the problem mentioned at the beginning of the article.
4. Today, a strange news came out in the international community. Pagers in Lebanon collectively exploded, killing 8 people and injuring 2,750 people. Many people were confused when they saw this news. What era is it still using pagers? It is a specially made, anti-surveillance pager, made specifically for people in the organization. It is said to be produced in Taiwan, but the Taiwanese manufacturer denied the rumor and said that it was authorized to BAC for production. It doesn’t matter who produced it. What’s important is that Israel infiltrated during the delivery process, and 30 grams of explosives were modified in all the pagers, and then the collective detonation occurred. This attack was very accurate, because not all members of a certain organization had this pager, so every explosion was accurate. Have you noticed that Israel can easily infiltrate its hostile forces, while those Muslim organizations find it difficult to infiltrate Israel, which shows that the organizational level gap between the two sides is quite large.
That's all.
