The 'Institutional Development' of the Capital Market: Far from a Strong Heartbeat Injection, but a Long and Arduous Journey

Many investors are infatuated with good news every day, treating it as a remedy for rebounds, racking their brains to find various positives to justify the market's rebound. However, they do not realize that the real good news is when you cannot find any positives after the rebound; the market relies on its own strength to achieve a rebound, making the foundation of that rebound the most solid. If you rely on good news for rebounds every day, the rebound will definitely not go far. In fact, for any rebound, we can identify many positives afterwards. However, it's difficult to provide a correct interpretation of existing positives before the market opens. If the market rises with good news and falls with bad news, then predicting the market would be much simpler. In reality, when the market is declining, no amount of good news can change the downward trend, and when the market is rising, no amount of bad news can change the upward trend. But every trend will eventually terminate; the end of a trend is only an inducement, merely a trigger.

Faced with the good news of 'institutional development' released by regulators, many investors' eyes light up, often interpreting it as a beacon for short-term rebounds. What is the result? The higher the expectations, the harder the fall. In fact, this kind of misinterpretation is akin to treating an engine design blueprint as gasoline—completely different things.

China's capital market has been around for over thirty years, and the rules and regulations are indeed continuously being 'patched'. We must not only ask: 'When will this system be completed? Why is it that after punishing one batch, another batch emerges? Is regulation truly just a “cotton swab”?' Behind such questioning is an underestimation of the market's complexity.

The capital market is not a static model but an ongoing cat-and-mouse game. Any system will expose 'loopholes' or 'ceilings' in market practice. It's like road construction: starting with muddy dirt roads, then paving asphalt, and later upgrading to smart highways—each stage faces new challenges. When new tools (like quantitative trading), new structures (like the registration system), and new participants emerge, regulations must inevitably be upgraded in sync. The essence of institutional development is not 'completion' but dynamic evolution.

Looking at why violators are 'rushing in one after another', the core lies in the crazy game between the cost of illegal activities and potential profits. Even if regulators strike hard, as long as the super profits from fraudulent listings and insider trading far exceed the expected costs, there will always be some willing to take risks. It's like a dam having gates, but when the flood peak is too large, water will always find weak points to overflow—no matter how tight the pre-check is, it is hard to achieve absolute leak-proofing. While penalties can punish individual cases, they cannot absolutely eliminate human greed and speculative impulses. More critically, building a culture of market integrity requires time to settle, far from being achieved with just a few fines. Of course, we lament the deterrent power of the US stock market regarding the penalties for Enron's fraud, inevitably criticizing the leniency of penalties in the A-share market.

Beware of the 'Policy Quick Effect Theory': Institutional development is a correction of underlying logic, not a theme speculation. Seeing 'improvement in delisting mechanisms' and fantasizing about a surge in junk stocks is often difficult to realize, and it’s essential to fully understand the contradiction between long-term institutional development and short-term markets.

Focus on the direction of releasing institutional dividends: In the long run, a standardized and transparent market is beneficial for the valuation restoration of high-quality companies. Pay attention to those enterprises that truly benefit from a healthy regulatory ecosystem (like leading companies that emphasize corporate governance).

Strengthen self-protection awareness: No matter how tight the legal net is, there are still gaps. Understand the essence of the rules, beware of the 'high yield low risk' trap, and do not bet your fate on arbitrage from institutional loopholes.

The long bull market in the stock market has never relied on a few policies shouted out loud. It requires a resilient legal framework, continuously optimized regulation, a mature investor group, and a soil of market integrity culture to cultivate together. Institutional development resembles a 'road construction project amid wind and rain'; rather than expecting it to become tomorrow's K-line catalyst, it is better to adjust one’s mindset and be a patient witness to the spiraling ascent of China’s capital market as 'patient capital'.

Simplicity is the ultimate sophistication, and slow is fast. A good system is never designed for explosive growth; it is meant to make the road smoother and the direction clearer.