A-shares have been trending on search engines, mainly due to two records set yesterday: the trading volume reached its lowest in over four years, and the net outflow of foreign capital was the highest in several years.

Especially after the trading volume of the Shanghai and Shenzhen stock markets fell short of 500 billion yesterday, this figure has inevitably caused concern among the market and investors. Today, the volume shrank by another 18.5 billion, with a combined turnover of 477.3 billion yuan for the two markets. Therefore, the biggest concern about A-shares is the fear of causing a liquidity crisis in the stock market?

What is a stock market liquidity crisis?

A so-called stock market liquidity crisis typically refers to the drying up of liquidity in the stock market. The meaning of drying up is that the funds in the stock market are decreasing. The stock market is part of the capital market, and with the drying up of liquidity, the stock market cannot function properly. In simple terms, it means no fluctuations and no amplitude, which will cause the stock market to lose its investment value. This is the stock market liquidity crisis.

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When the stock market falls into a liquidity crisis, it is very unfavorable for the stock market and stock investors. The liquidity crisis mainly manifests in the following four points:

1. It will cause asset prices to fall back within value, which means the return of stock value;

2. The trading volume of the stock market will become increasingly low, and the number of traders will also decrease;

3. The biggest drawback is that it will cause the external financial conditions to deteriorate, or financial transactions will fall into a difficult situation;

4. The confidence of the market and investors in the stock market will plummet, and without confidence, there is no motivation.Will A-shares Really Fall into a Liquidity Crisis?

We have already delved into the concept of a stock liquidity crisis and its four major manifestations. Now, let's analyze whether A-shares will really fall into a liquidity crisis based on the actual situation in the A-share market.

Although the total trading volume of the Shanghai and Shenzhen stock markets in A-shares was less than 500 billion yesterday, this level of volume is indeed low, which can only prove that A-shares have reached a mid-term bottom. The appearance of low volume will not trigger a liquidity crisis in A-shares, so investors can rest assured.

According to historical instances when low volume appeared in A-shares, the following two scenarios will occur to stimulate an increase in trading volume and resolve the liquidity crisis:

First: The national team steps in with increased volume, which means that mysterious funds will intervene to lift the market, increase the activity of A-shares, boost confidence, and stimulate additional funds to enter the market.

Second: Short-selling forces drive down the market, with the main players using their chips to create a dip, causing A-shares to fall into panic again, forcing out the passive holdings to sell at a loss, leading to a situation of increased volume and falling prices.

Expert Opinions are as Follows:

Recently, the continuous contraction of trading volume in A-shares has reached a low point. Experts believe that low volume is temporary and caused by insufficient market and investor confidence. As long as confidence is improved, it will inevitably resolve and alleviate the low volume situation.Therefore, the A-share market will by no means fall into a liquidity crisis, so please rest assured. The reason is that the national team will intervene, and at the same time, funds from outside the market will enter, which will definitely resolve the liquidity crisis. Let's wait and see.