Recently, there have been continuous negative news reports from listed companies, such as Sichuan Changhong being hit by international fraud, Yili executives being detained, and Great Wall Computer transferring assets. As a result of these news reports, the stock prices of related companies have all rapidly declined. Sichuan Changhong has hit the limit down three times in a row, Yili's stock price has fallen nearly 20%, and Great Wall Computer has also experienced rapid declines. Due to sudden negative news, ordinary investors have little opportunity to escape. So, what kind of operation should investors holding these stocks take to quickly resolve the situation?
Sudden negative events are a test of the confidence of circulating stock shareholders, especially for heavily held stocks by institutional investors. For heavily held stocks with institutional funds stationed, no matter how the fundamentals change, institutions will inevitably take self rescue actions after the stock price drops sharply, while stocks without the support of the main force may continue to decline.
For example, rumors of fraud in Changhong, Sichuan have been circulating for a long time, and Changhong's stock price has shown a preliminary downward trend in the past year. This adjustment process has already digested the negative news. So why did the stock price continue to fall sharply after the announcement of the inclusion of a fraud loss of 2.4 billion yuan in the 2004 annual report? This is mainly because the holdings of Sichuan Changhong are mainly small and medium-sized retail investors. According to the third quarter report, the total number of circulating shareholders of Sichuan Changhong is as high as 570129, while the per capita shareholding is only 1700 shares. Such stocks obviously lack the attention of institutional investors, and the subsequent sharp decline in Changhong's stock price did not have institutional funds to protect the market.
However, Yili Corporation and Great Wall Computer are not the same. These two stocks are heavily held by funds, and the list of the top 10 circulating shareholders is basically dominated by institutional investors such as funds. According to industry insiders, major events such as the detention of executives at Yili Corporation and the transfer of IBM shares by Great Wall Computer make it difficult for institutional investors to take protective measures on the day of the announcement. Once the stock price opens at the limit down position, it may trigger a larger area of selling, and the possibility of entering the market again after one or two limit downs is high. As the stock price falls, the cost of institutional protective measures will be significantly reduced, and the low price is more likely to attract follow the trend and buy in, which is conducive to quickly raising the stock price.
This is reflected in both Great Wall Computer and Yili Corporation. On December 10th, a large number of buying orders entered the market near the third limit down position of Great Wall Computer, driving up the stock price. On December 22nd, Yili Corporation's second limit down opened and staged a good show of turning red on the same day. Due to the generally low position of institutions (especially funds) involved in stocks, there is a huge opportunity for high selling and low buying during trading. Institutions can spread the cost to obtain the price difference and reduce their positions accordingly. If investors grasp the rhythm of institutional operations well, they can also have opportunities to break free.
The news released by the three stocks mentioned above is relatively bearish, while some unexpected events are purely psychological factors and have little impact on the market. For example, last year, the parent company of China Eastern Airlines experienced a plane crash. After the resumption of trading on November 22, the stock price of China Eastern Airlines immediately opened sharply lower, and there were continuous buying orders throughout the day. As the crash had no impact on the performance of listed companies, institutions had a good opportunity to compete for funding at a low level, and chips flowed from individual accounts to the hands of institutions.
Of course, if an unexpected event involves fundamental changes, it may have a significant impact on the future performance of the listed company. Ordinary investors need to decisively reduce their positions on the basis of mastering high selling and low buying. After all, the A-share market has entered the stage of value investors, and institutions are optimistic about the performance of enterprises. Institutions should reduce their positions accordingly, and the most rational approach for investors is to ship simultaneously.
