Chapter 108

On Thursday, December 31, the final curtain fell on the tumultuous year of 2015 for the A-share market, closing at 3539.18 points. This day marked the culmination of a year that witnessed both extraordinary highs and devastating lows. Financial media, in reflection, began to report on the events that shaped the domestic capital market in 2015 and ventured predictions for the upcoming year.

The year 2015 had been a rollercoaster ride, leaving an indelible mark on the more than 100 million shareholders of the A-share market. The supercharged first half was followed by the despair-inducing flash crash in the latter part of the year. The leveraged mad cow market witnessed a staggering 21 trillion evaporating within just six months, a stark illustration of the capricious nature of the capital market.

Tong Huashun, often regarded as a financial oracle by investors, became the most expensive "game" software on the phones of many, a testament to the unprecedented volatility and speculation in the market.

As the final trading day of 2015 drew to a close, fund performance rankings for the year were solidified. Notably, 21 OTC funds recorded a net value increase of over 100%, with the "E Funda Emerging Growth Hybrid" securing the second position. However, the undisputed champion was the Tiansheng Value Growth Hybrid Fund, a relative underdog in terms of size with a plate of 2.7 billion.

Media outlets competed to report on this exceptional performance. Headlines proclaimed Tiansheng's triumph, with phrases like "range-bound growth" and "Tiansheng Enchantress" echoing across financial publications.

Shareholders and the public alike engaged in animated discussions on forums and social media platforms. The unexpected prowess of Tiansheng's value growth mix in outperforming individual stocks, notably Expofeng Technology, stirred a mix of surprise, admiration, and perhaps a tinge of regret among investors.

The annual performance of the Tiansheng Value Growth Hybrid Fund, boasting a cumulative increase of over 19 times, sparked a subscription frenzy. As of December 31, 2015, the fund had amassed an impressive 32.6 billion yuan in size. The surge in subscription funds, especially in the past half-month, was attributed to institutional funds and large-scale funds entering the arena for arbitrage.

This influx, while contributing to the fund's growth, raised concerns for Lu Ming, the mastermind behind Tiansheng's success. The potential impact of large institutional funds engaging in frequent and substantial redemptions was a looming threat. Such actions could force the fund to sell stocks, disrupting the position portfolio and, subsequently, impacting stock prices.

In response to this concern, during the New Year's Day holiday on January 2, 2016, Tiansheng Value Growth Hybrid Fund announced an adjustment to subscription rules. Starting from the first trading day of the new year on January 4, investors seeking redemption of 50 million or more needed to make an appointment on T+15, providing a safeguard against abrupt and large-scale redemptions.

As Lu Ming entered the trading room on the morning of the first trading day of the new year, he sensed an air of anticipation. The implementation of the circuit breaker mechanism, a significant regulatory change introduced on January 1, 2016, was a focal point of discussion. Designed to curb extreme market volatility, the mechanism mandated trading suspensions if the CSI 300 index rose or fell by more than 5% or 7%.

Li Mingyang, noticing the unusual atmosphere, queried Lu Ming about his thoughts on the circuit breaker. Lu Ming's response was succinct but ominous – "It's going to collapse." He elaborated, highlighting the unintended consequences of tightening financial regulations in the first half of the previous year, which had led to a surge in off-market private equity allocations, propelling the market to new heights.

The circuit breaker, intended to prevent market crashes, was seen by Lu Ming as a potential catalyst for the opposite effect. The announcement of circuit breaker triggers, if perceived negatively, could lead to panic selling, triggering further market declines.

Lu Ming's foresight into the market dynamics prompted a strategic withdrawal in December, avoiding potential pitfalls. His cautious approach, coupled with a keen understanding of the psychological impact on market sentiment, positioned Tiansheng Value Growth Hybrid Fund for resilience amidst the uncertainties of the evolving market landscape.

As the first trading day of the new year unfolded, Lu Ming's insights into market dynamics and regulatory changes showcased the delicate interplay between strategy, timing, and adaptability in navigating the complex world of finance. The year 2016 was poised to unfold with its own set of challenges and opportunities, and Lu Ming, with his strategic acumen, was ready to navigate the evolving financial terrain.