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Retail investors trading the Shanghai Composite Index is the biggest sign of immaturity! If no reforms are made, the Shanghai Composite Index might still be around 4,000 points in 30 years! Because it already exceeded 4,000 points 19 years ago!
The SSE Composite Index is essentially a roller coaster! In the next 30 years, A-shares will still undergo massive expansion! Right now, the market cap of today’s big A is 110 trillion yuan. In the next 30 years, our total market value could possibly break through 1,100 trillion yuan. But the SSE Composite Index might still be around 4,000 points. Why? Because the index is constructed based on weighted stocks! Banks, insurance, and securities, along with central SOEs, account for more than 50%. These are all mature super large-cap stocks. They can’t surge sharply, and they also can’t crash. So in the next 30 years, it could still stay around 4,000 points. Second, new stocks are heavily hyped—after they list, they keep falling without end! This is also one of the important reasons dragging the index down. Third, the share of retail investors in China is 98%; funds are also made up of big retail-type investors. They chase rallies and sell on the way down. Some stocks rise more than 10x in a year, and then plunge for many consecutive years. This traps all value investors tightly in a vise. As a result, the index has always been hard to break out of a bull market for the long term. Because of these three reasons, along the current development path, the next 30 years could still be around 4,000 points.