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At the end of the 20th century, under the fluctuating internal and external environment, A shares ushered in a sharp cross-century market. Looking back, I'm afraid most people's eyes will focus on a series of important events, such as the Asian financial crisis, the extrication of state-owned enterprises, the 1998 flood, the Kosovo war and so on. It is in this complex environment of "internal and external difficulties" that A shares ushered in the first round of "technical cattle" in the past 20 years. In a narrow sense, the starting point of this round of science and technology market is1May 1999 19, so it is also called "5 19 market" in the afternoon.

The macro environment of 1: the pattern of "internal troubles and foreign invasion" has not been reversed.

1. 1 Although the impact of the Asian financial crisis has passed, the economy has not yet got rid of the long-term recession.

In the late 1990s, China's economic growth continued to slow down. Although it survived the Asian financial crisis, the domestic fundamentals are still in the inertia recession channel of 65438-0999. From the perspective of GDP growth rate, China's economic growth rate has slowed down year by year since 1993, and nominal and real GDP has declined for seven consecutive years since 1999. After the overheated growth in the early 1990s, inflation dropped from a high level, CPI and PPI entered a deflationary range (CPI and PPI were negative all year round), total demand continued to be restrained, and there was no turning point in the short term. The Asian financial crisis broke out in 1997- 1998. In order to cope with the impact of the crisis, domestic macro-control policies have been adjusted from moderate to tight to expand domestic demand, stimulate the economy and expand the deficit to increase government expenditure and infrastructure construction. Although it played a role in boosting investment in the short term, the downward pressure on the economy reappeared at 1999.

Overcapacity and debt problems of state-owned enterprises are superimposed, resulting in prominent structural contradictions, laid-off workers, real estate, pension and other issues exposed, and insufficient demand is further aggravated. Because the economy has been in a deflationary recession cycle for a long time, the efficiency of state-owned enterprises was low in the late 1990 s, overcapacity and debt problems were exposed. The reform of state-owned enterprises has entered a critical stage, and problems such as laid-off workers, real estate and old-age care need to be solved urgently. In addition, the Asian financial cycle of 1997 and the flood of 1998 have further aggravated the problems of social structural contradictions and insufficient total demand.

In terms of sub-items, the decline in investment was an important reason for dragging down the economy of that year. Consumption has improved, but the intensity is limited, among which electronic consumer goods are the most eye-catching. 1999 The investment data in the first year is very impressive, with a year-on-year growth rate of more than 20% in the first quarter, but the main reason is the low base of the previous financial crisis and the support of the previous expansion finance. With the high base and the financial recession, the investment growth rate dropped sharply in the second half of the year. In terms of consumption, it fell first and then rose, with a zero social growth of 6.8% throughout the year. 1999 introduced policies to encourage consumption, including civil servants' salary increase, improving the three guarantees and opening the secondary housing market, which played its due role. Among them, the change of consumption structure is particularly obvious. According to the statistics of China National Business Information Center, the traditional consumer goods were in a downturn, the growth rate of textiles decreased by 17.5%, and the glass products decreased by 9.4%, while the emerging electronic consumer goods and consumer goods related to the improvement of people's quality of life performed brilliantly, such as electronic and audio-visual products, communication equipment, gold and silver jewelry, etc.

The money continued to be loose, but the willingness to lend continued to decline. 1999 shows obvious characteristics of "generous money but tight trust". As China's economy continued to decline, the central bank implemented a loose monetary policy and cut interest rates several times to release liquidity. 1June, 1999, the central bank lowered the deposit and loan interest rates of financial institutions by 1.00 and 0.75 percentage points respectively, which was extremely loose. However, the willingness of enterprises to lend continues to be sluggish, and M0 and M2 are obviously deviated from each other at 1999. The liquidity environment is a typical feature of "wide money and tight credit".

1.2 The external economy is picking up and the tide of science and technology is rising, but the political environment is complex and changeable.

The recovery of overseas economy led to the repair of foreign trade, but the Fed's entry into the interest rate hike channel led to the tightening of external liquidity. After the Southeast Asian crisis, most core economies in the world bottomed out from 1998 to 2000, with middle-income developing countries rebounding the most. The annual real growth rate of global GDP was 3.6%, which was higher than 1998 by more than 1 percentage point. Benefiting from the recovery of external demand, China's import and export growth rate turned from negative to positive in 1999, achieving a positive growth of 6. 1% for the whole year. Judging from the export breakdown data, the improvement of external demand is particularly obvious in Southeast Asia. At the same time, with the sustained economic recovery, the Federal Reserve entered the interest rate hike cycle on 1999, and the cumulative interest rate hike reached 75BP three times during the year, which promoted the continuous upward movement of overseas interest rate centers.

The Nasdaq wave has sprung up and set off a wave of "technology" around the world. 1999 is the peak year of the Nasdaq bubble. Starting from 1995, "technology stocks" represented by the Internet economy began to enter people's sight. After the emergence of mosaic browser and World Wide Web, the establishment of official website has become a necessity for listed companies in various industries, and the business model based on the Internet has emerged, which has aroused the infinite imagination of the public and attracted the pursuit of all kinds of capital. In the following five years, the speculation of new economy technology stocks in the market gradually bubbled. By the close of 1999, the Nasdaq index had quadrupled, and the valuation (PE) of the Nasdaq Composite Index reached an astonishing 152 times. The emergence of one science and technology "myth" after another has set off an upsurge of Internet hype around the world.

However, for China, the periphery of 1999 is not calm. The outbreak of the Kosovo war complicated the international situation, and the Yugoslav embassy incident brought Sino-US relations to a freezing point. 1999 the outbreak of the Kosovo war directly hit the newly-rising euro to a historical low, which was superimposed with the start of the Fed's interest rate hike cycle, which directly gave birth to another round of strong dollar cycle. More importantly, the bombing of the China Embassy on May 7 that year triggered violent demonstrations in China, and Sino-US relations fell to the freezing point since the 1990s.

2. Policy environment: all-round wide currency and persistently high capital market.

2. 1 In terms of macro-control, the expansionary finance and currency continued from 65438 to 0998.

Faced with internal and external pressures, expansionary fiscal and monetary policies have continued since 1998. 1998 after the expansionary fiscal policy was implemented to expand domestic demand and start the economy, 1999 China made further efforts in macro-control, and the policy focus was fully rolled out from 1998 to the three major demand ends of investment, consumption and export, including: 1, adjusting the income distribution structure of residents, raising the salary of civil servants and improving the three major guarantees. 2. Relax consumer credit business and resume interest tax collection; 3. Significantly increase the export tax rebate rate to above 15% twice during the year, stabilize foreign exchange at the same time, and effectively ensure the balance between local and foreign currencies.

2.2 The introduction of the "six-point proposal" has improved the status of the capital market in an all-round way.

External bad news has hit, but the resilience of economic fundamentals, more relaxed liquidity environment and strong rebound of corporate profits have become the main driving forces for the accelerated rise of the stock market.

1999 mid-term, high-level eyes turned to the capital market, and the positioning of the capital market was elevated in all directions. During the period of 1999, the savings of Chinese residents reached 6 trillion yuan. However, in the context of the central bank's repeated interest rate cuts and even various stimulus policies, the effect of transforming savings into investment is still not good. On the one hand, the reasons behind it lie in the low willingness of entity credit expansion, on the other hand, it is also related to the lagging development of China's financial system and the inability to better realize the function of resource allocation. Under this background, several policy opinions on further standardizing and promoting the development of the securities market were formulated and submitted to the State Council. On May 16 of that year, the Six Opinions on Further Standardizing and Promoting the Development of the Securities Market (namely, "Six Policies for Invigorating the Market") was approved, which proposed to reform the stock issuance system, enter the market with insurance funds, gradually solve the legal financing channels of institutions, allow securities companies to issue bonds and expand securities investment funds.

After the introduction of the "six-point opinion", the People's Daily followed closely to endorse the stock market, further igniting the enthusiasm of capital for entering the market. 1999 After the market opened on May 9/KLOC-0, driven by technology stocks and internet stocks, the Shanghai Composite Index rose 52% in a single month, setting a record for A shares. On June 15, the front page of People's Daily once again published a special commentator's article "Strengthening Confidence and Standardizing Development", which characterized the market situation since May of that year 19 as "the actual situation of macroeconomic development and the inherent requirement of market operation is normal recovery". The endorsement of People's Daily has become the accelerator of this round of market, further igniting the enthusiasm of capital entering the market.

3. Review of "519 Quotes": Small ticket speculation and theme rampage

3. 1. Overview: The generalized "5 19 quotation" continues to 200 1.

1997- 1999, A shares experienced a bear market for two years under internal and external shocks. Taking the "Six Opinions on Invigorating the Capital Market" as an opportunity, A shares rose sharply after the opening in May 1999. In a narrow sense, the "5 19" market is extremely sharp and short-lived. In a broad sense, the "5 19" market continued to 5438+0 in June 2006, and the cumulative maximum increase exceeded 1 10%. According to the market interpretation, the market trend of 1999 to 200 1 can be roughly divided into the following four stages: the first stage (1999-5- 19 to 1999-6-29) and the second stage (/kloc-0).

3.2. The first stage: sudden change of wind and cloud and exponential riots (1999-5- 19 to 1999-6-29).

"Six opinions on invigorating the capital market" ignited the market enthusiasm, and the index ushered in a wave of skyrocketing market. Looking back at the release of 1999 "six opinions", the policy itself does not constitute a direct benefit. There are several reasons why the index ushered in an unusually fierce riot market: 1, A shares experienced a bear market for two years before, and the overall valuation level fell back to a reasonable range; 2. Combined with the environment at that time, these six opinions were the first affirmation of the stock market by the highest level in China; 3. The surrounding stock markets have emerged from the shadow of the Asian financial crisis, especially the Hang Seng Index in Hong Kong, which bottomed out as early as August 1998, and the cumulative increase in May 1999 has more than doubled; 4. In addition to the "six opinions", the double width of currency volume and price, the promotion of state-owned enterprise reform and the entry of insurance funds into the market are all important reasons for boosting the "5 19" market.

1999 From May 19 to June 29th, the Shanghai Composite Index rose by 64% in less than 1 half a month. During June 15, the front page of People's Daily published a special commentator's article "Strengthening Confidence and Standardizing Development", which defined the market since May 19 that year as "the actual situation of macroeconomic development and the inherent requirement of market operation are normal recovery", which played a role in fueling the market interpretation. At this stage, A shares performed outstandingly, with Shenzhen Stock Exchange Index, Shanghai Stock Exchange 180, Wandequan A and Shanghai Stock Exchange Index rising by 9 1.33%, 74.46%, 67.38% and 64. 10% respectively, while the South Korean Composite Index, which performed best in other overseas economies, only rose by 20%. At that time, the A-share market was relatively small, with 869 listed companies, including 864 stocks that rose in the first stage and only 5 stocks that fell. Judging from the top 30 stocks at this stage, they are generally "technology concept" enterprises with small market value and high valuation, and the static performance of most companies is considerable.

3.3. The second stage: the market enters a rest period (1999-6-30 to 1999- 12-27).

After the skyrocketing stock market entered the rest period, capital market support policies were continuously introduced. 1999 In the second half of the year, A-shares that experienced a short period of turmoil entered the callback period, and the external market continued to improve, especially the Nasdaq market was in full swing, and the global wave of science and technology did not end. At the same time, capital market support policies are still being released intensively. 1 July, the Securities Law was formally implemented, which marked the establishment of a centralized and unified supervision system for the securities market and the legalization of the securities market entered a new stage. Since then, capital market support policies, such as allowing debt-to-equity swaps and allowing funds and securities companies to enter the interbank lending market, etc. In the same year, China Insurance Regulatory Commission allowed insurance funds to enter the stock market through cross-funds. During this period, there are also some outstanding "scientific and technological goals". Judging from the distribution of stocks that have increased by more than 20%, there are still small-cap and high-valuation enterprises, but the overall performance quality is obviously not as good as that of the first stage.

3.4. Stage III: the second main surge (1999- 12-28 to 2000-8-2 1).

After nearly half a year's consolidation, A shares regained their upward trend in the early years of the new century. During this period, as a rare telecommunications service index with "scientific and technological attributes" at that time, it significantly outperformed other industries and achieved huge excess returns in 2000; And in terms of style, there is an obvious differentiation trend in the stock market, and small-cap stocks continue to outperform the broader market in recent 1 year. Although A shares tend to be active again in the new century, the external market has quietly changed. After five years of rapid operation, the Nasdaq index reached the peak of 5000 points in March 2000, and it did not rise above 5000 points until 15. Judging from the distribution of stocks with the highest increase (more than 150%), enterprises with small market value and high valuation account for the vast majority, and their performance still lags behind the leading companies in the first phase.

3.5. The fourth stage: the market came to an end in a high shock (2000-8-22 to 200 1-6-6).

The bursting of the Nasdaq bubble dragged down the global stock market, and A shares also entered the end of the "5 19 market" in the high shock. Nasdaq index began to fluctuate downward after reaching its peak in March, 2000, and ushered in B wave rebound from June to September, and then entered diving mode, which triggered a global stock market crash. The rising momentum of A shares was also interrupted, and the index turned to a high level. The volatility of A-shares continued until the middle of 200 1 year, during which small and medium-sized stocks were still relatively dominant, but telecom services and information technology, which led the gains in the previous period, led the decline. In the second half of 200 1, with the gradual tightening of supervision, the "5 19 market" bid farewell to the historical stage completely.

3.6. Summary and reflection on "5 19 quotation"

Looking back on the cross-century market of 1999-200 1, the market focus is on the concept of network and the theme of science and technology. As a "technology stock" at that time, telecommunications services stood out, but the style obviously tended to be small and medium-sized stocks, and small-cap stocks obviously outperformed large and medium-sized stocks.

-Macro variables: 1999 -200 1 year, domestic macro-economic growth as a whole is poor, both internal and external, facing great recession pressure, and growth and inflation have not been able to get rid of the downward channel; Counter-cyclical regulation and control policies are strong, and the benchmark interest rate has fallen sharply. By the middle of the year, the central bank had cut interest rates seven times and the liquidity environment was very abundant.

-Regulatory environment: Since the Six Opinions on Further Standardizing and Promoting the Development of the Securities Market, the positioning of the capital market has been greatly improved; 1999 the first corporate bond listed on the stock exchange-97 State Power Company Bond was listed on the Shanghai Stock Exchange; On July 29th, the CSRC issued the Notice on Further Improving the Stock Issuance Method. On the same day, Dai Xianglong, governor of the People's Bank of China, pointed out that qualified brokers will be allowed to enter the interbank lending market and the bond repurchase market, and securities companies will be allowed to borrow money from banks through stock pledge.

-Incremental funds: At that time, the domestic stock market was still in its infancy. On the one hand, institutional investors are very weak, the stock allocation of Public Offering of Fund and insurance funds has just started, open-end funds have not yet been launched, and there are only a few closed-end funds. From 1998 to 2000, the share scale was 10 billion, 5 10 billion and 66544 respectively. On the other hand, problems such as the size of non-tradable shares and the reduction of state-owned shares make it difficult to unify the interests of tradable shareholders and non-tradable shareholders. Market participants are mainly retail investors, large households and some industrial capital, and during the hot market of 5 19, there were a large number of cases in which brokers misappropriated customer deposits to "sit in the village" under the relaxed regulatory environment.

-Other environmental factors: 1999-200 1 year, the external stock market was in the bull market of science and technology internet, American internet companies were in full swing, and the Nasdaq bubble became more and more obvious, which played a certain demonstration role in China.

To sum up, the market environment during the "5 19" market can be summarized as follows: poor economic growth, good monetary conditions and abundant liquidity; The regulatory environment is extremely relaxed, with the support and encouragement of the "six opinions" and the official media, the market enthusiasm is high, and there have been many speculations and even incidents represented by "Yi 'an Technology". Market trading entities and incremental funds are composed of retail investors, large households and part of industrial capital, which are driven and demonstrated by overseas technology markets. It is not difficult to find that the macro and micro variables from top to bottom during the period of 1999-200 1 provided a hotbed for the speculation of small-cap companies with the theme of "science and technology", and small-cap stocks and "science and technology" companies really constituted the core context of the A-share market during this period. On the other hand, the so-called cross-century market of A-shares shows almost all the typical characteristics of the "wild era" of the stock market, such as the deviation of the stock price from the fundamentals, frequent manipulation of the stock price, loose supervision and internal control of the securities industry, and extremely low proportion of institutional investors.

Risk warning

1, macroeconomic fluctuations exceeded expectations; 2. Overseas fluctuations exceeded expectations.

For detailed analysis, please refer to the announcement of "5 19": I will never forget the technical ox released on October 5, 2 0 20.

Analyst: Zhang Qiyao, analyst's practice number: s0680518100001e-mail :zhangqiyao@gszq.com.

Analyst :zhangjunxiao@gszq.com Zhang Junxiao analyst's practice number: s0680518110001e-mail: