Abstract: The next step may be to expand the derivatives in the capital market, which is a fundamental condition for strengthening and solidifying the capital market. Zero interest rates and negative interest rates may arrive more rapidly.

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The world is facing a "scarcity of assets," and France has also collapsed.

Currently, Europe is seeking to resolve the economic crisis through the conflict between Russia and Ukraine. Both victory and defeat are aimed at dividing Ukraine. This is to expand the economic scale and resolve the pressure of overcapacity. Creating problems is the best way to resolve the "scarcity of assets." Some high-leverage European countries have begun to experience bond collapses, with France showing the first signs of collapse.

Political turmoil in France has triggered a sharp market repricing, with France experiencing the most severe bond market collapse since the sovereign debt crisis.

Since the announcement of early elections, the difference in the yield of 10-year government bonds between France and Germany has reached its highest level in over a decade, as investors bet on lower risk in Germany.

On Friday, the yield on France's 10-year government bonds rose by 6 basis points to 3.33%, the highest level since November last year. This has widened the spread between it and the safer German government bonds to 86 basis points, the largest increase since 2012.

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"Bond bull" "Asset scarcity" continue? Interest rate cuts may accelerate.

Today, witness history! The yield on the active 10-year government bond 240004 has fallen to 2.2000%; previously, the low on April 23 was reported at 2.215%. The yield on 50-year government bonds has broken through 2.5%, with the yield on ultra-long-term government bonds reaching a previous low.

The continued downward trend in government bond yields indicates that the "scarcity of assets" is still expanding, which is favorable for the bond market to continue its bull market. The continued downward trend in government bond yields also indicates a pessimistic market outlook for the medium to long-term economy. More favorable stimuli are needed, such as interest rate cuts and reserve requirement ratio reductions, to resolve the "scarcity of assets."For the stock market, it is not necessarily good news, because the "asset scarcity" will push the policy side to urgently look for funds, and expanding direct financing will be the best direction. However, the current stock market is extremely weak, indicating that the funds within are also under great pressure.

How to resolve the contradiction of direct financing in the stock market? Generally speaking, the most common response to the supply side is equivalent to the choice of trade-offs, keeping the big and abandoning the small. Each industry needs to keep the leading companies, which is equivalent to keeping the big basic plate. Therefore, we see that in the current capital market, small-cap stocks are more affected. Large-cap stocks, on the other hand, are increasingly being occupied by various types of funds.

In the first half of the year, more than 400 billion yuan of funds flooded into equity ETFs. Stock markets around the world are also experiencing a continuous bull market for ETFs, which shows that large funds are entering ETFs for risk aversion, or are optimistic about the future growth of ETFs. The ETFs in A-shares are still somewhat different from those abroad, mainly in the index components.

The index components in the West are more intuitive, while ours are more complex. This is due to different marketization foundations, but in the future trend, they will generally converge. That is, the components of A-share indices will become more and more similar to those in the West. There's no way around it, this is the natural law of marketization.

Therefore, in terms of layout, generally speaking, the leaders in each industry are the best direction. But you have to get it right, whether it is a leader or not. This is very important. Because many industry leaders are not listed on A-shares, that is, some industry leaders in A-shares are not the real leaders.

The current "asset scarcity" is not only present in our country, but also globally, except for the US Federal Reserve, everyone is facing this pressure. Including US companies also face "asset scarcity", and in the past two years, six medium-sized banks in the US have gone bankrupt.

A common solution to "asset scarcity" is to wait for the Federal Reserve to cut interest rates. Or to expand domestic stimulus. However, domestic stimulus needs a pool to accept it. That is, the market economy space to accept it. If economic development encounters bottlenecks, even if the stimulus is released, it dare not flow out, forming a pattern of empty rotation. This is the case for all countries except the Federal Reserve. Many countries have chosen war to restart the economy. Peace is actually a disaster for the economy, which is really ironic. For countries that have leveraged, only war can erase the pressure.

Review of important news over the weekend

Central Bank: Increase the implementation of monetary policy that has been introduced. The China Securities Regulatory Commission (CSRC) carries out a comprehensive evaluation of reforms and plans further comprehensive deepening of reforms.

This indicates that there may be no new short-term monetary policy. And the comprehensive deepening of reforms in the stock market may indicate that there may be a significant change in the IPO policy, with the goal of implementing a big protection strategy, that is, marketization. Let good companies go public, and let big countries and big companies be stable.The data speaks for itself. A new landscape for IPOs! Nearly three hundred terminations (with 296 IPOs terminated in the first half of the year, already surpassing the total of 282 terminations for the whole of last year), and some leading securities firms have terminated over 30 IPOs in half a year.

At present, it is unclear how the IPO landscape will evolve. Conventionally, if the IPO market is liberalized, many junk stocks would be deterred from going public. Companies that do go public would also have to strive to improve their performance and would not dare to act recklessly. However, these are just our assumptions; the specifics will still depend on the final policies.

In addition to controlling IPOs, generally speaking, the most powerful positive factor is deregulation. As I mentioned earlier, by learning from India and the West, deregulating derivatives such as individual stock options, and increasing the overall market turnover by 5-20 times, the entire market could be revitalized. However, such a shock would also be significant, and junk stocks would not be able to withstand it. This is the crux of the issue; there is a fear that the A-share market might consider itself to have too many junk stocks. The new "Nine National Guidelines" are good, and the main reason for the market's decline is that some listed companies are somewhat hollow, and investors' psychology is also somewhat hollow. Everyone is afraid of stepping on a mine.