Financial reference for epidemic response: cycle, panic taking away time point

category:Finance
 Financial reference for epidemic response: cycle, panic taking away time point


The novel coronavirus pneumonia outbreak which is suddenly tense at the beginning of Spring Festival should be different in different peoples hearts, with different expectations of pessimism or optimism. The overall worry about the future is also reflected in the capital market. On February 3, the first working day after the Spring Festival, the A-share market opened in the year of the rat. After the opening of the market, the stock market fell sharply. The Shanghai stock index fell 8% at one time, and the capital market was full of sorrow. Under the panic of the market at that time, there was a seemingly joking saying that was not unreasonable: dont panic. When the epidemic passes, the stock will naturally rise back; if the epidemic doesnt pass, then you dont have to worry about money..

The financial market is full of fluctuations, such as interest rate, exchange rate, stock index, oil futures, gold price, economic policy, even employment rate and purchasing manager index, etc., all of which are constantly changing, and the only constant is the change itself. Time is also the thin slice of the changing trend. Most days, the market only changes slightly, and behind these micro and milli centistokes, there are endless cycles of slices connected by countless times.

The accumulation of time points is long-term change, that is cycle. For example, there is a famous virtual clock in the field of investment cycle, which is the so-called Merrill Lynch Investment clock. In 2004, Trevor greentham, an analyst at Merrill Lynch, put forward the theory that the economy is in a cycle of recovery, overheating, stagflation and recession due to economic growth and inflation. In the same clock circle, stocks, commodities, cash and bonds play different best investment products in different stages Role. If this investment strategy is simple, as long as the major categories of investment follow the clockwise rotation of Merrill Lynch clock face, probably the rate will not be wrong. Merrill Lynch Investment clock is deeply rooted in the hearts of the people, but it is slightly ironic that Merrill Lynch Securities, named after the investment clock, was acquired by Bank of America due to poor management in the last financial crisis, and no longer exists as an independent legal entity.

Merrill Lynch clock covers a short period of time. If we talk about a longer period, there is a famous KangBo theory which has only been widely known in China in recent years. Zhou Jintao, the former analyst of CSCI securities, who died, is the pioneer of the research on KangBo theory in China. His famous saying making a fortune depends on KangBo makes many people hear about KangBo theory for the first time. This theory comes from kantladiev, a Russian economist. It covers 60 years. It can be divided into recession, investment, prosperity, over construction and chaos periods, each of which lasts for 10 or 20 years. According to this theory, modern history has only experienced 5-6 cycles. The first round of KangBo marked by the use of steam engine began in 1790. After that, the world economy experienced the second round marked by railway, the third round marked by automobile manufacturing, the fourth round marked by electronic products and the fifth round marked by Internet. At present, some economists say that we are in the fifth round of recession, and some say that we are at the beginning of the sixth round of KangBo. Perhaps they are all right in saying that the end is the beginning and the beginning is the end.

The change of financial asset price is closely related to the timing of the cycle. The impact of the cycle on the price is profound and silent. Unconsciously, the prices of stocks, currencies, bonds or loans have completed the cycle in the peaks and valleys of the cycle, as if the four seasons of nature alternate. Every day seems to have little change, but it has its own winter and summer, winter and spring. At the time point, the market will be shocked by the fierce turbulence. At the fierce time point, the price can soar to the sky or plunge to the sky. Whether it is fixed income products or equity assets, it is possible to complete the accumulation of wealth in a very short time or cause the elimination of value. The changes in this short period of time are more like the drastic changes in the weather. When the storm comes, the wind howls, the lightning flashes and thunder. In a moment, it is possible for the rainbow to fly and the wind is sunny.

In different periods and time points, because people have different views on the future, short sellers sell, long sellers buy, and financial transactions are just established.

In September 2008, Lehman Brothers, an American investment bank, fell to the ground, and the financial tsunami sweeping the world then reached its peak. The global financial industry was in a state of shock. At that time, the author worked in overseas branches of Chinese banks and was responsible for international syndicated loans. After a little panic, the price of syndicated loans of some mainstream companies still fell significantly. For example, Lufthansa in the aviation industry and Mittal anseller in the steel industry, the all-in (total) revenue of its syndicated loans has reached 400 basis points, and the normal price is only 30-40 basis points. We believe that even if the European economic downturn continues, the debt repayment risk of these benchmarking companies should remain limited, and then they will purchase hundreds of millions of euros, after which the loan principal and interest will be recovered on time. We also got a high return for the right view at that time. Such a high-quality asset as interest margin income has never been seen for many years. The cycle is vast, the time is sudden, and the financial asset price is not the only one that is deeply affected. The change of financial asset price can be avoided by not participating. If we dont speculate in stocks, the stock price will jump up and down. If we dont work in the financial industry, the rise and fall of loans and bonds seem to be far away. But when such a major event happens, no one can stay out of the dome.

The time of Finance tests the investment ability in the financial circle, and the important time of society tests everyones attitude towards life. The difference of one thought is pessimism to the left, optimism to the right; magnanimity or panic, one thought can become a Buddha, one thought can also become a devil. Up to now, although the epidemic has been developing for a short time, it has given many people an opportunity to test their own judgment. Ask yourself, a month ago, what did you think of the development after the outbreak? How do you anticipate the future?

Time is the end of a cycle. Even a 10-year cycle is long for life, let alone a once-in-a-lifetime Kang wavelength cycle. At the moment of every day, the vast majority of us cant jump out of the narrow and prejudice of just because we are in the mountain. We are faced with the fragments of the cycle. Most of the time, the day after day is even long and boring. The transition of every day may depend on not the choice, but the inertia.

When the real big event comes, I hope we can see the future in the fog and have enough confidence to move forward.

(the author Xue Jian is the general manager of the head office department of a foreign legal person bank)