Summary of Key Points
During the 2015 stock market crash, China Securities Finance Corporation (CSFC), the main player in the national bailout efforts, bought stocks indiscriminately to restore market liquidity. As a result, it unexpectedly became the largest shareholder of Meiyan Jixiang, a company with extremely dispersed equity ownership and poor financial performance. This news sparked widespread excitement among investors: retail investors believed that "support from the national team" equated to safety, while speculative funds took advantage of the situation to hype up the "CSFC concept," causing Meiyan's stock price to double in just 10 days. However, the bubble eventually burst, and the stock price returned to its original level, leaving many retail investors trapped in their investments. In contrast, companies like Moutai and Midea, which had solid financial performance, saw their stock prices increase several times over the following years. This absurd episode highlights the fundamental difference between speculative and value-based investing.
Analysis of the Situation
1. Why Did CSFC Become the Largest Shareholder of Meiyan Jixiang?
It was purely an unintended consequence of the bailout efforts. Meiyan Jixiang was a struggling company with changing main businesses (it had dabbled in hydroelectric power, turtle farming, and mining) and consistently reported losses. Its stock price was around three to four yuan, and it lacked a clear controlling shareholder (the original largest shareholder had left, and the remaining shareholders held very small stakes, with the former largest shareholder holding only 0.53% of the company's shares).
In July 2015, during the worst period of the crash, CSFC was instructed to buy stocks wherever they were hitting the daily limit down. Traders had no time to select specific stocks and simply bought whatever was offered on the market. As a result, CSFC acquired 7.36 million shares of Meiyan Jixiang for just a few tens of millions of yuan. Although this amount was insignificant compared to CSFC's vast funds, it exceeded the 0.53% stake held by the former largest shareholder, making CSFC the de facto largest shareholder of the company.
2. The National Craze for the "CSFC Concept"
When the news spread, retail investors became obsessed with the idea that being backed by the national team would ensure the stock's stability. They referred to Meiyan Jixiang as the "CSFC Princess" or a "directly affiliated company of the national team," ignoring its poor financial performance. Speculative funds saw this as an opportunity: they identified stocks with the "CSFC concept" (anywhere CSFC or Huijin was listed as a shareholder, even if their stake was only 0.1%) and began to build up positions quietly. They then spread rumors about the involvement of the national team in the stock market, waiting for retail investors to buy in before selling their shares at higher prices. Meiyan's stock price soared from 5 yuan to 10.84 yuan within 10 days, with eight consecutive daily limit-up sessions. Even when the company issued warnings about potential risks, retail investors dismissed them, thinking the opposite was true.
3. The Bubble Burst
Once the market stabilized, CSFC slowed down its buying activities. Speculative funds were the first to realize that the trend had turned and began selling their shares. On the trading lists, the seats previously occupied by these funds (such as those from Shenzhen Yitian Road and Ningbo Jiefang South Road) were now showing selling activity. As the stock price dropped, retail investors reacted in different ways: some believed it was a sign of a "cleaning process" and decided to buy more; others took their profits and fled; many who bought at the peak were unable to sell and faced forced liquidations due to leverage agreements (1:3). In the end, Meiyan's stock price dropped back to around 3 yuan, as if nothing had changed.
4. The Contrast Between Meiyan Jixiang and Value-Based Stocks
The fate of Meiyan Jixiang starkly contrasts with that of companies like Moutai and Midea:
- Moutai: Its stock price fell to 160 yuan during the crash but later rose to 2,600 yuan over 10 years, thanks to its strong financial performance.
- Midea: Its stock price increased from 20 yuan to 100 yuan after the crash, driven by globalization and profit growth.
- Hengrui Medicine: Its stock price also rose from 10 yuan to 100 yuan, fueled by innovative drug development.
These companies did not rely on the "national team" label but on their actual products, profitability, and competitive advantages, which allowed their stock prices to rise steadily over time. In contrast, Meiyan's stock price returned to its original level after the bubble burst.
5. A Lesson for All
This incident serves as a reminder:
- Regulators: They have become more cautious about disclosing their stock holdings during bailouts to avoid misunderstandings.
- Retail Investors: Do not rely on labels (such as "national team" or "concept stocks") when making investment decisions. Ask yourself: What does the company do? Does it generate profits? Would you still want to hold its shares even if their value halves?
- Market Principles: No matter how attractive a bubble seems, it will eventually burst. Only companies that create real value can sustain long-term growth.
Meiyan Jixiang serves as a cautionary tale: short-term speculation may bring immediate gains but often results in losses, while value-based investing may be slower but more reliable in the long run.
This analysis uses plain language to explain the logic and essence of the events, making it easy for non-financial professionals to understand.