Beijing Business Daily: The failure of hot money trading strategies is an evolution in the capital market

Gelonghui on April 1 | The Beijing Business Daily published an article stating that recently, a piece of news titled “a group of speculative capital bosses collectively surrendering” has sparked heated discussion in the capital markets. Not long ago, those speculative capital giants who had been able to dominate the market with “market feel” are now frequently making mistakes and falling into step-by-step retreat. The “malfunction” of speculative capital tactics appears on the surface to be “technical trading” losing to “algorithmic trading,” but in reality it is a form of evolution in the capital markets.

Speculative capital relies on technological advantages, capital advantages, and trading experience. It is good at using market sentiment for arbitrage; at its core, it is a kind of extreme speculation. The moment a new concept comes out, speculative capital rushes in, but what they target is never the long-term prospects for the industries associated with that new concept—only the arbitrage space created by short-term market sentiment. Under the survival rules of speculative capital, a company’s fundamentals are not important; what matters to them is only whether they can profit and exit safely after pushing the price up. Speculative capital has fueled a speculative atmosphere in the A-share market, misleading a batch of investors into believing that they can gain huge profits in the capital markets through pure speculation alone. Some investors have even completely abandoned fundamental research into listed companies and instead focus on purely technical approaches such as leading-stock strategies, first-day board strategies, and limit-down strategies—this is a classic case of putting the cart before the horse.

However, times have changed. In recent years, the ecosystem of the A-share market has been undergoing fundamental change. The “malfunction” of speculative capital is not accidental; it is an inevitable result of the capital market’s evolution. Speculative capital ignites—quantitative trading extinguishes the fire. But losing to quantification is only the surface phenomenon of speculative capital’s “malfunction.” From the earliest counter trading, to placing orders by phone, to computer trading, speculative capital’s trading operation methods have also been continuously improved alongside technological upgrades. Quantification is only a trading tool and has no targeted advantage.

Under high-pressure regulation, regulators have severely cracked down on all kinds of market manipulation behavior, making it increasingly hard for speculative capital to keep playing those borderline tactics—false declarations, matched buy-and-sell orders, and end-of-day price spikes. In practice, it is not that speculative capital has lost to quantification; rather, speculative capital has been gradually eliminated by the continuously optimized new ecosystem of the A-share market. The A-share market has said goodbye to the era of big rises and big falls; transforming into value investing is the only choice.