Economic Divergence in Millet Stocks

The potential of the "millet economy" concept stock has been a hot topic and a source of speculation in the financial market, but signs of differentiation are now emerging. The "millet economy," which has captured the imagination of many investors, is witnessing a shake-up as several of its previously high-performing stocks are beginning to falter, suggesting a shift in market dynamics.

On December 5, a notable trend emerged as stocks within this category began to show signs of distress. For instance, Guobo Co., Ltd. (002103.SZ), which had enjoyed a remarkable nine-day winning streak, saw its shares plunge by 8.76%, closing at 12.6 yuan per share. Other stocks like Qixin Group (002301.SZ), Huali Technology (301011.SZ), Nanjing Business Travel (600250.SH), and Beijing Culture (000802.SZ) followed suit with declines of their own. Interestingly, two companies bucked the trend; Tianyu Digital Technology (002354.SZ) and Gaole Co., Ltd. (002348.SZ) both hit their upper limit of trading gains within this turbulent period. This phenomenon signifies not only a division in the stocks' performance but also indicates changing investor sentiments.

In the past week, many shareholders of these trending businesses opted to cash in their shares, showcasing a sense of urgency and perhaps a reaction to the unpredictable market. Companies like New World (600628.SH) and Huali Technology have reported partial share sell-offs, further contributing to the volatility surrounding the millet economy stocks.

Market experts argue that a significant factor driving this fragmentation is the limited number of robust companies capable of sustaining their performance. The financial results and operational capabilities of many of these stocks seem incapable of supporting their inflated shares in the long haul. Thus, investors are advised to tread cautiously as they navigate the sometimes turbulent waters of this speculative investment pool.

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As we analyze the market movement on the date, the volatility becomes even clearer. For instance, Guobo’s decline was not just a blip; the stock faced consecutive trading limits over two days prior, creating a sharp contrast against its previous high of 18.78 yuan per share on December 3. This signifies a staggering drop of approximately one-third from its peak.

In the wake of these changes, stocks that were previously skyrocketing, such as Qixin Group, also observed a significant drop, hitting a trading limit downward on December 4 and then falling 4.88% to close at 8.18 yuan per share the following day. Huali Technology dropped by 2.37% on the same day, closing at 32.55 yuan.

The "millet economy" had previously soared in popularity, seen as a promising sector in the A-share market. Within a month, the index reflecting this concept jumped from 3,152 points on November 4 to a high of 3,388 points on December 4, a nearly 10% increase. Guobo led the charge with a remarkable nine-day rise that saw its shares soar from around 7.24 yuan to 17.07 yuan by December 2, marking an impressive gain of over 135%.

Despite the exuberance of the market, a closer examination reveals that many of these high-flying stocks, while attracting attention, have not demonstrated substantial profitability or performance metrics that align with their market valuation. The disconnect between stock prices and actual business performance raises questions about sustainability.

In light of the recent downturns, many stakeholders took the opportunity to reduce their holdings. New World disclosed on the evening of December 3 that its major shareholder, Guohua Life, had significantly trimmed its stake, selling 23.43 million shares, representing 3.62% of its holdings, during a period marked by rising share prices. This strategic move suggests a preemptive caution as market conditions start to shift.

Likewise, stocks such as Jiangxi-based Tom Cat (300459.SZ) and Huali Technology saw their significant shareholders offload portions of their holdings around the same time as their share prices peaked. Effective management appears critical, as demonstrated by the trading behaviors of these major players, prompting careful scrutiny from market analysts.

The inflated stock prices of these concept securities stand in stark contrast to the actual business contributions they represent. Guobo, in a recent announcement highlighting risk factors, noted that its main business focus remains on educational and office supplies, and any financial benefit from its ventures into the “millet economy” is relatively minimal and not expected to buoy its earnings significantly in the short run. Similarly, New World and Light Media have mirrored these sentiments, cautioning stakeholders about the limited impact of their ventures into the burgeoning “millet” space on overall performance.

This raises the question: how do stocks maintain their trajectories when they appear to be detached from any tangible financial performance? The reality is that although share prices soared, many companies revealed underwhelming earnings, and some even reported losses. For instance, Shifeng Culture, a notable player in the field, despite boasting a rich portfolio of IP assets, struggled with a consistent downturn in profits over recent years. Their financial reports from 2020 to 2023 depict staggering losses amounting to tens of millions annually.

Even the companies that seemed to be thriving, like Guobo and Tom Cat, also recorded declines in earnings during the first three quarters of this year, underscoring a broader struggle within the sector. Guobo's revenue fell by 1.45%, and Tom Cat witnessed a staggering 58.33% drop in net profit compared to previous periods.

Industry insiders suggest that the core essence of the "millet economy" revolves around intellectual property licensing and distribution. While numerous firms may have stumbled upon this concept, the reality remains that few have truly harnessed its potential for revenue generation in the A-share market. The recent ascent in stock prices appears to correlate closely with speculative investments fueled by retail investors rather than fundamental business growth, revealing a market more reflective of sentiment than stability.

Case in point, Guobo’s trading data from November 19 to 28 reflects an extraordinary divergence from typical performance metrics, driven predominantly by individual investors and lesser by institutional buying. With over 82% of purchases stemmed from retail investors, the fervor surrounding these shares showcases more of a speculative frenzy rather than a reflection of legitimate growth or profitability.

Overall, while the “millet economy” concept stocks generated initial excitement, the subsequent performance trends raise important questions about their future viability. Investors are urged to remain informed and analytical, as the fluctuations within this sector may potentially illuminate broader trends in the marketplace that could impact investment decisions moving forward.