The Market Has Seized The Fusing Mechanism. This Scapegoat Risk Remains Unchanged.

Last Friday, the Shanghai and Shenzhen two cities opened up sharply in early trading after being suspended by the fusing mechanism.

However, on Monday's closing, there was no fusing mechanism, and the A share market remained disappointing, with more than 1000 shares in the two cities falling, and less than 100 stocks floating.

It seems that the A share market's "down and down" is not the fault of the fusing mechanism.

The market has caught the scapegoat of the futile mechanism, but the stock market risk factors still exist, and it is difficult to get out in a short time.

The A share market has become one of the "home markets" in the global capital market.

Whether recognized or not, the influence of A share volatility on global stock market is strengthening.

This is the inevitable result of capital market reform and RMB exchange rate marketization since 2015.

The A share market is no longer a closed system. Every move of the wind and the regulators may have a chain reaction with the global market.

At the beginning of the new year, global stock markets whine, the market value evaporated 2 trillion and 500 billion US dollars in the 3 trading days, the worst start since 2000.

There are many reasons, but judging from the analysis of the western institutions,

The implementation of downlink and fusing mechanism and the poor performance of A shares are regarded as the main reasons.

If China wants to become the protagonist of globalization, not only will the A share market perform better, but economic governance will also undergo severe tests.

There are more risk factors.

First of all, the fundamentals of macro-economy are still in a downward trend.

In December, China's official PMI was 49.7, and was in line for May for a long time.

According to the data released by the National Bureau of statistics, CPI increased by 1.6% in December 2015, and the total CPI level in 2015 increased by 1.4% over the previous year, lower than the 3% target set by the government.

PPI declined for 46 consecutive months.

The second is market panic caused by liquidity tension.

The Fed's interest rate hike, the capital outflow and RMB exchange rate reduction caused by the "basket" of the renminbi have resulted in a tense liquidity expectation.

But based on RMB

Without the promise of long-term depreciation, the policy will not allow the RMB exchange rate to fall.

Looking at the actual liquidity strain, by the end of 12 in 2015, China's foreign exchange reserves were US $3 trillion and 330 billion, a drop of 107 billion 900 million US dollars from the end of last month, the largest monthly decline in history.

From the perspective of market equilibrium, monetary policy is urgently needed to release liquidity.

In order to maintain the basic stability of the RMB exchange rate, the central bank did not dare to enlarge the monetary policy loosely. However, it was also full of fear for the stock market instability, and worried about the ups and downs of the 2015.

The exchange rate must be stable and the stock market should be protected. This is a dilemma for policy makers.

From the market suspension of the fusing mechanism and the exchange rate drop, the policy is faced with

The "double bracing" measures were adopted.

However, policy support is an opportunity or a persistence. It needs further market observation.

To be sure, we need to make a trade-off between monetary policy and monetary tightening.

Based on the experience of us, Japan, Europe and other economies in saving the economy and the reality of China's macro-economy, monetary easing is still a good solution to the problem of market package.

Otherwise, the policy will be difficult to balance the stock market and the foreign exchange market, and will be pressed by the gourd.

In the beginning of 2016, the monetary policy of the central bank slowed down slowly, and the market did not wait for the news to reduce or cut interest rates. The liquidity strain had a panic effect in the A share market.

Third, although regulators recently issued a new regulation to reduce the holding of major shareholders, they have tightened their hoops.

However, since 2015, more than one trillion yuan has been accumulated and the market panic has gradually been released. This is also a problem that the A share market has to face.

In addition, the registration system is not a problem in itself. But whether the psychological impact on the market will be as bad as that of the fusing mechanism, good reform will reverse the bad effect?

Whether the stock market is good or foreign exchange markets, the two cities are all dynamic risk systems.

Moreover, many risk factors that restrict the development of the A share market have not yet been fully cleared. Therefore, the policy side needs more time to move, grasp the dialectical relationship between the economic strategy and the governance strategy, and minimize the market risk.