Chapter 15: Who Is Reducing Their Holdings

On Friday, the stock market experienced a significant pullback. Recently, the market had been consolidating within a narrow range, yet daily trading volume consistently hovered around two trillion yuan. Some retail investors vented online, complaining that this kind of market was tougher to navigate than widowhood—neither rising nor falling, stuck in a lifeless stalemate, making it nearly impossible to operate.

In truth, such a market is indeed bland and unrewarding for retail investors, but for certain quantitative funds, it presents a prime opportunity. After all, a daily trading volume of two trillion yuan facilitates fast in-and-out movements for high-frequency trading capital.

Since he had a meeting scheduled next week with Zhanghe Aviation Investment, Long Wuyang returned to Jingchu City over the weekend. Coincidentally, several of Lao Jia’s old friends arranged a dinner gathering that evening, so Lao Jia brought Long Wuyang along. Among those dining were President Lu from the Universal Branch, professional investor Ding the Big Player, and Director Wang from the government office. Lao Jia’s generation, born in the 1970s, had ridden the wave of China’s reform and opening-up, and now formed the backbone of various social strata. When they were young, they were bold and spirited, even their drinking bouts were legendary. Now older and less able to handle alcohol, they restricted themselves to some greens, fine tea, and a touch of cultured leisure.

Lao Jia introduced Long Wuyang to the group. Once seated, everyone ordered their drinks. Long Wuyang, not drinking alcohol, chose a bottle of Dayao soda.

Lao Jia remarked, “If our generation stops drinking baijiu, then Moutai will be reduced to its original state. Young people nowadays simply don’t drink baijiu at all. I wonder if this is consumption upgrading or downgrading.”

Then Lao Jia turned to Long Wuyang, asking, “Do your female classmates like buying handbags and cosmetics?”

Long Wuyang blushed slightly and replied, “It seems none of them do.”

“Why not? Don’t you post-2000s socialize?” Lao Jia asked.

“It’s just that how others view our appearance isn’t that important. Why should we spend our own money to please others’ eyes? Spending money to dress up just to show off seems foolish. It’s better to live comfortably and happily without worrying about what others think,” Long Wuyang answered with conviction.

“Ah? The mindset of today’s youth is truly strange!” Lao Jia sighed, and the others were equally puzzled, not expecting the post-2000 generation to be so unconventional.

President Lu, Lao Jia’s fellow townsman, a tall and slender man with a cigarette dangling from his lips, took a sip of beer and immediately his face flushed like a piece of pig’s liver. He slowly said, “Moutai will suffer the same fate as Changhong did in its prime. Changhong always positioned itself as a television manufacturer, but with the rise of smartphones and mobile internet, nowadays only the elderly watch TV at home. Young people’s consumption habits have changed. If you don’t adapt to meet the demands of the young, you are destined to be eliminated. Changhong focused on making TVs bigger and bigger, never thinking of making them smaller or turning them into phones. That was a strategic blunder.”

“Ha! Well said!” Lao Jia chimed in. “Then Moutai should venture into milk tea. Moutai has so much cash; it should pursue a diversified business strategy—not just alcohol, but all kinds of beverages. Even acquiring Coca-Cola wouldn’t be out of the question.”

“By the way, Old Lu, the internet says your Universal Branch compiled data on fund flows from bank-to-stock transfers during this market phase, claiming institutions are net sellers while retail investors are net buyers. Is that data reliable?” asked Ding the Big Player, who formerly worked at a state-owned enterprise, found his job dull, then retired early to become a full-time stock investor, enjoying life immensely.

President Lu glanced around the room, noting the door was firmly shut, then whispered conspiratorially, “Whenever the U.S. cuts interest rates, China uses the stock market to attract overseas hot money. But unexpectedly, retail investors, especially the post-2000s, have leveraged up and rushed in with all sorts of consumer loans—dazzling and chaotic. There’s a joke online about a group of beggars pawning their dog-beating sticks for silver at a pawnshop and then storming into a casino, scaring both the pawnshop and the casino. We have our own statistical models and big data analysis. This round, institutional funds were all net outflows, leaving retail investors trapped above 3,300 points. Most of these institutional funds are state-owned capital, which took the opportunity to reduce holdings. Lao Jia, what do you think—aren’t these state-owned capital players lacking a sense of the bigger picture?”

Lao Jia picked up a piece of pickled radish, its sourness narrowing his eyes to slits. “This radish really hits the spot!” He smacked his lips and said, “As for state-owned capital reducing holdings, I think that’s precisely political savvy and having a big-picture view. If you let these post-2000s retail investors run wild and turn the stock market into a bull frenzy, that’s not what the country wants. The government’s regulatory approach is to have institutional funds douse the fever when the market goes crazy, and take the chance to sell some shares and free up cash to ease local government fiscal pressures. It’s fiscal equity, after all—if there’s a chance to monetize, you monetize. So, this round, net outflow of state capital is perfectly normal and expected.”

“Ah! So this means we post-2000 folks got screwed again? No wonder they call us chives!” Long Wuyang said indignantly.