Navigating the Shanghai Stock Market: A Comprehensive Guide
Intro
Navigating the labyrinth of the Shanghai Stock Market is no small feat, especially for foreign investors. The market, with its vast opportunities, can feel like a double-edged sword, promising significant gains but also posing notable risks. To make sense of this complex environment, one needs to have a firm grasp of specific terminology, regulatory frameworks, and effective strategies tailored to this unique financial landscape.
This guide serves as a comprehensive roadmap, laying out the groundwork for understanding key terms, developing tailored investment strategies, and assessing risks in the Shanghai Stock Exchange (SSE). Knowing this will empower investors to make informed choices in one of the world’s largest equity markets.
Investment Dictionary
Key Terms and Definitions
To navigate the stock market effectively, it’s essential to familiarize oneself with the language of finance used here. A solid investment dictionary can be an invaluable companion. Key terms include:
- A-shares: Stocks traded on the Shanghai Stock Exchange, denominated in Renminbi (RMB).
- H-shares: Shares of Chinese companies traded in Hong Kong, often appealing to foreign investors.
- Qualified Foreign Institutional Investor (QFII): A program allowing approved foreign investors to invest in the Chinese stock market.
- Stock Connect: A trading link that allows international investors to trade A-shares through Hong Kong.
Common Investment Strategies
When it comes to investment strategies that work in the Shanghai Stock Market, they often diverge from those used in more familiar Western markets. Here are some common approaches:
- Value Investing: Finding stocks that are undervalued based on fundamental analysis.
- Growth Investing: Focusing on companies with strong potential for future growth, even if their current valuation seems high.
- Momentum Trading: Investing in stocks that are trending upwards, aiming to capitalize on existing market sentiment.
Understanding these terms lays the foundation for better decision-making regarding stock selection and market timing.
Expert Advice
Tailored Investment Strategies
There isn’t a one-size-fits-all approach to investing in Shanghai. Each investor must align strategies with individual risk tolerance and capital goals. Conduct thorough research on sectors, as the Chinese economy is dynamic, with certain industries emerging faster than others. For example, technology and healthcare sectors show promising growth potential, often influenced by government policies.
Risk Assessment and Management
Investing inevitably involves risk, and understanding how to mitigate it is crucial. Here are key considerations for risk assessment:
- Market Volatility: The Shanghai market can be volatile. Keep an eye on macroeconomic indicators and geopolitical events.
- Regulatory Risks: Since regulations can shift, staying informed about new policies is paramount.
- Diversification: Spread investments across different sectors to minimize exposure to any single downturn.
“In investing, what is comfortable is rarely profitable.”
Navigating the stock market, especially one as unique as Shanghai’s, requires not just knowledge but also a strategic mindset coupled with awareness of the prevailing market conditions. No shortcuts here; diligence and adaptability will serve savvy investors well in their journey on the SSE.
Understanding the Shanghai Stock Exchange
Diving into the Shanghai Stock Exchange (SSE) holds significant importance for investors looking to tap into China's vibrant economic landscape. This exchange, being one of the largest in the world, serves as a vital avenue for capital raising and investment. Understanding its nuances can equip foreign investors with the necessary tools to make informed decisions, essential for navigating this bustling marketplace.
Historical Context
The history of the Shanghai Stock Exchange is rich, marked by both rapid expansion and intricate challenges. Established in 1990, the SSE was born from a reformed economy, aimed at revitalizing China’s capital markets post-socialism. The initial phase saw a handful of listed companies. By the late 1990s and into the early 2000s, the market began to burgeon, with an influx of domestic companies wishing to list on the exchange. This growth was driven by China’s economic success, sculpting the SSE into a critical player in global finance.
The establishment of the Qualified Foreign Institutional Investor (QFII) program in 2002 was a milestone, opening doors to foreign investors and paving the way for a cross-cultural investment environment. Understanding this context not only provides insight into how the SSE operates but also highlights the underlying potential it holds for the future.
Market Structure
The market structure of the Shanghai Stock Exchange is structured yet dynamic. It essentially features two primary categories: A-shares and B-shares. A-shares are denominated in Chinese Yuan and available primarily to domestic investors, while B-shares are offered in foreign currencies, allowing overseas investors a stake in the Chinese economy. Knowing these distinctions is fundamental for anyone looking to engage deeply with SSE stocks.
Categories of Stocks
When discussing the Categories of Stocks, it becomes clear that A-shares dominate, nesting a plethora of sectors from technology to healthcare. This diversity is highly attractive, enabling investors to strategically pick stocks that align with various investment philosophies. One notable aspect of A-shares is their volatility, which can be both an opportunity and a risk. The ability to engage in a market with fluctuating prices creates chances for high returns but demands keen oversight.
Moreover, B-shares, while less popular, grant a unique advantage due to more international trading. This broad spectrum allows investors to diversify their holdings in a market that is rich and growing.
Market Participants
Understanding the Market Participants in the SSE reveals essential dynamics. The exchange hosts an array of players, from retail investors to institutional giants. Retail investors typically engage in speculative behavior, often driven by market sentiment, while institutional investors focus on long-term strategies—this difference in approach shapes market trends.
The presence of a growing number of foreign institutional players further diversifies the landscape, bringing in varying strategies and insights that influence overall market behavior. Retail investors may find particular guidance in these institutional practices, learning to navigate their investments more adeptly.
In looking at these two aspects—categories of stocks and market participants—one recognizes that the Shanghai Stock Exchange is not merely a platform for trading but a complex ecosystem where diverse entities coexist, compete, and collaborate.
"To invest in the Shanghai Stock Exchange is to engage with not just a market, but a vibrant narrative of growth, caution, and immense opportunity."
The Shanghai Stock Exchange it a window into the immense potential of Chinese enterprises, with each stock telling its own story.
Investment Prerequisites for Foreign Investors
When diving into the dense waters of the Shanghai Stock Market, foreign investors need to equip themselves with a solid understanding of the prerequisites for investment. Gaining access to this market isn’t just about having capital; it's a whole package deal that involves understanding legal landscapes, registering properly, and knowing what tools are at one’s disposal. This groundwork lays the foundation for successful investments, allowing investors to navigate with a clearer head. Knowing these steps shields against potential pitfalls and enhances the likelihood of a more fruitful investment experience.
Regulatory Environment
Understanding the CSRC
The China Securities Regulatory Commission (CSRC) serves as the gatekeeper for the Shanghai Stock Market. Its significance cannot be overstated. Founded primarily to oversee the securities market, this body plays a vital role in maintaining fair trading practices and protecting investors. The CSRC lays out regulations that guide how foreign investments are structured, providing a framework that foreign investors must respect. Its rigorous regulatory standards include ensuring transparency in company operations and financial disclosures, something foreign investors greatly value.
A major benefit of engaging with the CSRC is the protection it affords investors by fostering fair play in the market. Investors can rest assured knowing that there are checks and balances in place. However, navigating through CSRC’s rules can be a tad challenging, especially for those unfamiliar with China’s legal intricacies. Nonetheless, understanding the CSRC is crucial as it provides clarity in a complex market, thus allowing foreign investors to make informed decisions while adhering to established laws.
Laws Governing Foreign Investment
The laws surrounding foreign investment in China are a mixed bag, reflecting the country’s growing integration into the global economy. These laws are designed to create an environment that welcomes foreign capital, but they come with a set of strict guidelines that investors must abide by. This legal framework not only delineates the processes for entering the market but also sets forth the rights and responsibilities of foreign investors.
Among the striking aspects of these laws is the emphasis on registered investments. Foreign entities are often required to register their investments with governmental bodies, ensuring compliance with local regulations. While some might view this as a hurdle, it also acts as a safeguard, ensuring that the investment climate remains stable and beneficial for all parties involved.
As foreign investors dip their toes into these legal waters, it's key to stay updated on any amendments or tweaks to laws, as they can impact investment strategies significantly. Not keeping abreast of these legal nuances could potentially mean missing opportunities or, worse, liabilities.
Accessing the Market
Direct vs. Indirect Investment
Investors have a critical choice to make when it comes to accessing the Shanghai Stock Market: should they opt for direct investment or take the indirect route? Each option has its own perks and quirks.
Direct investment generally means buying shares in companies listed on the Shanghai Stock Exchange directly. This route allows for more control and potential for profit. However, the pitfalls include navigating a complex regulatory framework that can be a steep learning curve for some.
On the flip side, indirect investment allows foreign investors to buy into funds that hold Chinese stocks, which offers diversification and reduced risk. This method might provide a smoother ride, especially for those still finding their footing in the Shanghai Stock Market’s landscape. However, it might come with management fees that could nibble away at profits. The key is to weigh the level of risk tolerance against the desire for hands-on investment management.
QFII and RQFII Programs
Qualified Foreign Institutional Investor (QFII) and Renminbi Qualified Foreign Institutional Investor (RQFII) programs represent the dual approach the Chinese government has taken to facilitate foreign investment. Both programs are instruments allow foreign entities to invest directly in the Chinese stock market but cater to different types of investors.
QFII is popular among larger institutional investors due to its ability to invest in a broad range of assets; it is a gateway for those holding significant capital to tap into the market directly. Conversely, RQFII mainly targets those looking to invest using Chinese Renminbi, further blending the international with local capital.
Each program comes with its own set of advantages and restrictions. For instance, while QFII might offer more extensive options, RQFII grants an easier entry for investments in Renminbi-denominated products. Still, keeping track of the evolving regulations linked to these programs is critical, as changes can affect access and operational methodologies significantly.
Opening a Trading Account
Opening a trading account is a crucial step for anyone aiming to dip their toes into the waters of the Shanghai Stock Market. This process allows investors, especially those from outside China, to start buying and selling stocks listed on this exchange. By establishing a trading account, one effectively gains access to market insights, a variety of investment options, and the ability to participate in financial growth in one of the world’s largest economies.
The significance of choosing the right type of account and brokerage cannot be overstated. This decision will affect fees, trading capabilities, support, and even the ability to navigate the intricate regulatory landscape prevalent in China’s financial systems.
Choosing a Brokerage
Choosing a brokerage can be a minefield, particularly for foreign investors who might not be as familiar with the local firms. This choice often boils down to deciding between local brokers and international ones, each carrying distinct advantages and caveats.
Local vs. International Brokers
When it comes to local versus international brokers, a key aspect to note is that local brokers often have a better understanding of the Shanghai Stock Market's unique characteristics and regulations. They tend to provide tailored services that align with local practices, making them a popular choice for those wanting a hands-on approach in navigating the market.
On the flip side, international brokers can offer a broader range of global investment options, appealing to investors looking to diversify their portfolios beyond China. Their comprehensive tools, platforms, and research capabilities make them a favored choice for tech-savvy investors, offering a seamless experience for trading internationally.
Ultimately, the ideal choice may well depend on individual investment goals. For hands-on management and understanding of local trends, a local broker might serve better. Conversely, if broader access and innovative trading tools are paramount, then an international broker becomes the more advantageous route.
Comparative Analysis of Fees
Another significant element to deliberate upon is the comparative analysis of fees between brokerages. Understanding the cost structure can help investors avoid unpleasant surprises down the line. Generally, local brokers may offer lower transaction costs when trading domestic stocks but could impose higher fees on international transactions. Conversely, international brokers often have tiered fee structures that might initially appear higher but can actually be lucrative for high-volume traders.
This fee structure is critical, as excessive fees could erode potential gains and deter investors from active trading. Keep an eye out for the various types of fees which may include commissions, maintenance fees, or even hidden charges that may not be immediately apparent.
In summary, a comprehensive analysis of fee structures will enable investors to choose wisely, with both short and long-term trading costs in mind.
Documentation Required
Documentation is often the unglamorous side of investing, but it plays a vital role in ensuring compliance and facilitating transparent transactions. Getting the necessary documents in order is essential for smooth trading.
Identification and Financial Documents
The first step involves preparing identification and financial documents. Typically, brokers will require a valid ID, such as a passport or national identity card, in addition to proof of residence and possibly even bank statements to verify your financial status. This is commonplace not just in China but globally, as firms need to ascertain the identity of their clients for regulatory reasons.
Providing proper ID not only speeds up the account opening process but also helps in building trust between investors and brokerage firms. Potential investors should be prepared to provide these documents upfront to avoid delays. Forgetting or improperly submitting key identification can lead to headaches later and delay the opportunity to start trading.
Know Your Customer (KYC) Procedures
The Know Your Customer (KYC) procedures are another layer of scrutiny that every prospective investor must navigate. These are put in place to prevent fraud and ensure that firms conduct business with reputable individuals. The KYC process involves scrutiny of documentation submitted, gathering additional information, and sometimes even interviews or contact verification.
While KYC can appear cumbersome, it is a necessary evil to create a secure trading environment. The benefits of adhering to KYC are manifold; it minimizes risks associated with illicit activities in financial markets and fortifies the integrity of the trading system.
Signing off on the KYC procedures alters the nature of relationships between brokers and investors towards transparency and accountability, which is particularly crucial in markets as dynamic as Shanghai's.
Analyzing Investment Opportunities
In the realm of stock trading, particularly in a vibrant market like the Shanghai Stock Exchange, knowing how to identify viable investment opportunities is crucial. With thousands of companies vying for attention, it’s all too easy to get lost in the noise and make hasty decisions. This section will unpack the two main approaches to analyzing investments: fundamental and technical analysis. Both methods have their merits and can serve as guiding lights in the often murky waters of equity investing.
Fundamental Analysis
Evaluating Company Performance
Evaluating company performance is at the core of fundamental analysis. Investors dive deep into financial statements, earnings reports, and other key metrics to paint a picture of a company’s health. One key characteristic that makes this method popular is its comprehensive nature; it allows investors to gauge not just current performance but also potential growth over time. For those looking to build a solid portfolio, understanding profitability margins, revenue streams, and the overall financial stability of a company is invaluable.
The unique feature of evaluating company performance lies in its focus on long-term potential. Investors often seek companies with strong fundamentals, as they tend to weather market fluctuations more effectively. However, one possible disadvantage could be that it requires a wealth of information and a fair bit of number crunching. For lay investors, diving into balance sheets might seem like deciphering a foreign language.
Sector Analysis
Sector Analysis complements company performance evaluation by providing context and understanding of how different industries influence stock prices. This aspect helps investors recognize industry trends and cyclical nature that might affect their stocks. One of its standout characteristics is the ability to identify sectors on the rise and those facing headwinds—information that can make the difference between profit and loss.
Sector analysis is also beneficial for diversification purposes. By examining various sectors, investors can spread their risk, which can be crucial in times of economic uncertainty. However, a downside might be over-reliance on sectors that seem trendy without sufficient underlying strength. Investors must distinguish between transient hype versus sustainable growth.
Technical Analysis
Charting Stock Prices
When it comes to technical analysis, charting stock prices is a vital tool. This technique involves studying historical stock price movements and volume to predict future movements. The key feature here is its focus on price patterns, which some investors believe reflect supply and demand dynamics. For active traders, this makes charting an attractive choice as it allows them to seize short-term opportunities based on quickly shifting trends.
A distinctive advantage of charting stock prices is that it relies less on external data, such as economic reports, which can often be delayed or distorted. However, heavy reliance on charts could lead traders to overlook fundamental data that may indicate deeper underlying issues, leading them to make decisions based purely on data analytics.
Indicators and Trends
The use of indicators and trends is a core element within technical analysis. By employing various indicators—like moving averages or the Relative Strength Index—investors can get a clearer picture of possible future price movements. This approach can help pinpoint entry and exit points, making it increasingly popular among day traders.
The ability to leverage indicators provides a structured framework for decision-making. Investors can set specific criteria that signal whether to buy or sell. Nonetheless, one has to be cautious; indicators may lag or produce false signals in rapidly changing markets, which can sometimes lead to costly mistakes.
"Investing in the stock market involves more than just choosing the right stocks; it demands a keen understanding of both fundamental and technical factors to navigate through complexities."
In summarizing these analytical approaches, it becomes clear that a well-rounded strategy often incorporates both fundamental and technical elements. The former offers promises of long-term stability, while the latter can capitalize on short-term trends. Investors are encouraged to not just choose one but rather to blend insights from both methods to shape comprehensive investment strategies.
Understanding Market Conditions
Market conditions are a foundational aspect for any investor, particularly when it comes to navigating the complexities of the Shanghai Stock Exchange. A clear grasp of prevailing market conditions enables investors to make informed decisions that can significantly impact their portfolio outcomes. Understanding how various elements interact—such as economic indicators and geopolitical factors—provides invaluable insights into potential risks and opportunities.
Investors need to be particularly attuned to the unique characteristics that define the Chinese market. Factors such as economic growth rates, inflation, and international relations play pivotal roles in determining market dynamics. For instance, a burgeoning GDP might signal robust economic health, while certain trade policies might restrict market access or introduce volatility.
Knowing how to interpret these signals allows for better investment strategies, equipping investors to seize opportunities and sidestep pitfalls. Hence, comprehending market conditions is not just a supplementary aspect; it is critically central to crafting a successful investment approach.
Economic Indicators
GDP Growth Rates
GDP growth rates are a prime indicator of economic performance. They reflect the overall health of the economy, directly influencing investor sentiment. If the GDP is on an upswing, it typically indicates that businesses are thriving, which generally leads to higher stock prices. This is especially true in a rapidly growing market like China, where even small shifts can have far-reaching effects.
However, it’s important to note that GDP growth can be a double-edged sword. High growth rates often attract foreign investment, but they can also lead to market overheating and consequent corrections. Therefore, potential investors should carefully analyze GDP trends and pair them with other metrics to get a holistic view of market conditions.
- Key characteristic: GDP growth is closely watched as a barometer of economic activity.
- Benefit: It aids in identifying strong sectors positioned for gains.
- Consideration: Be cautious of over-reliance on this single metric, as it may not account for regional disparities or sector-specific weaknesses.
Inflation and Interest Rates
Inflation and interest rates are closely interlinked and serve as critical factors influencing investor behavior. High inflation typically erodes purchasing power and can compel central banks to raise interest rates, leading to higher borrowing costs. This can pose a challenge for companies reliant on debt for growth, ultimately affecting stock performance. Conversely, low inflation coupled with low-interest rates can stimulate economic activity, making it easier for companies to expand.
Understanding the delicate balance between these two indicators is crucial. Investors should keep an eye on inflation trends, as they often serve as precursors to shifts in monetary policy.
- Key characteristic: Both indicators can rapidly alter market sentiments.
- Benefit: They provide insight into future economic conditions, helping investors gauge timing for entry or exit.
- Consideration: Look beyond headlines; sometimes the underlying factors affecting inflation are more telling than the rates themselves.
Geopolitical Factors
Understanding Sino-US Relations
Sino-US relations are a critical lens through which to assess the market conditions in Shanghai. The intricate web of trade, policy decisions, and diplomatic interactions between the two superpowers can sway market sentiment and influence stock valuations. When relations are stable, market confidence tends to flourish. In contrast, tensions—whether they stem from trade wars or political disputes—can shake investors' confidence, leading to market volatility.
Investors should maintain a vigilant eye on news and developments related to these relations, as they often shape not only the stock market but also sectors that might become impacted by tariffs or regulations.
- Key characteristic: Relationships between countries can influence stock prices through tariffs and regulations.
- Benefit: Awareness provides contextual understanding, making it easier to anticipate market trends.
- Consideration: Geopolitical climates can shift rapidly, requiring investors to stay informed.
Trade Policies Impacting Market
Trade policies are intricately linked to market health and can have pronounced effects on the Shanghai Stock Exchange. Favorable trade agreements often lead to increased market access and growth opportunities for Chinese companies. On the other hand, restrictive policies may hinder market performance and make it challenging for foreign investors to operate efficiently.
What's unique about trade policies in this context is their immediate impact on sectors. For instance, tariffs on technology exports can specifically affect technology firms, often leading to drastic stock movements.
- Key characteristic: Trade policy decisions can create waves across multiple sectors.
- Benefit: An understanding of trade dynamics allows investors to pinpoint sectors ripe for growth or potential downturns.
- Consideration: Stay mindful of changing policies as they can alter competitive landscapes overnight.
Understanding the interplay between economic indicators and geopolitical factors cannot be overstated. It is essential for making informed decisions in the fast-paced atmosphere of the stock market.
Executing the Purchase
Executing the purchase of stocks is a crucial step in your investment journey. Understanding how to navigate this phase can make a significant difference in your overall success in the Shanghai Stock Market. The approach you take—whether using specific order types or closely monitoring your investments—can dictate not just your potential gains but also how you manage risks. Making informed, strategic choices during this phase is essential; it’s where your theories and analyses meet reality.
Order Types
Market Orders
A key aspect of market orders is their straightforwardness. When you opt for a market order, you're essentially instructing your broker to purchase shares of a stock at prevailing market prices. One of the distinguishing characteristics of market orders is immediacy. Because they execute at the next available price, market orders become a beneficial option for investors looking to get into or out of a stock quickly.
The benefit here lies in certainty—if you decide to buy, you do so without delay. However, one downside is that you may not always grasp the exact price at which you’re buying, especially in volatile markets. Fluctuating prices can swing most dramatically in tightly traded stocks, and this is something worth paying attention to before placing such an order.
Limit Orders
On the flip side are limit orders, which allow you a bit more control over your buying price. When placing a limit order, you specify the maximum price you're willing to pay for stock. If the market price reaches or falls below that price, your order will be executed.
This kind of order stands out for its key characteristic of price control. Many investors find limit orders to be beneficial, particularly if they are keen on buying a stock at a desired price without feeling pressured by quick market movements. However, be aware that there's a risk with limit orders; if the stock doesn't reach your specified price, the order may remain unfilled, and this could lead to missed opportunities, particularly in fast-moving markets.
Monitoring Investments
Setting Up Alerts
A crucial part of managing your investments effectively is setting up alerts. These notifications help you keep an eye on specific stocks and market conditions without needing to watch the screens constantly. Whether through a broker or a financial platform, alerts can be tailored to notify you about price changes, percentage shifts, or breaking news related to your investments.
The beauty of setting up alerts lies in accuracy and responsiveness. You'll receive timely information that can guide your next steps, allowing you to act quickly when the market fluctuates. However, an overreliance on alerts could also lead to unnecessary anxiety, especially during volatile market periods. Balancing caution and responsiveness is the key here.
Regular Portfolio Reviews
Finally, engage in regular portfolio reviews. This step goes beyond simple monitoring—it's about assessing your entire investment strategy. When you take the time to evaluate your holdings, you can identify underperforming stocks or sectors that don’t fit your evolving investment strategy.
Portfolio reviews are vital, as they help you adapt your approach to changing market dynamics and personal financial goals. However, over-committing to frequent reviews may lead to hasty decisions driven by short-term fluctuations rather than long-term strategy. It's essential to find a rhythm that works for you.
Regularly reviewing your portfolio allows for a strategic alignment between market realities and personal objectives. Without this, your investment philosophy may drift, potentially affecting your long-term success.
Navigating Exit Strategies
Ensuring a successful investment in the Shanghai Stock Market doesn’t stop at purchasing stocks. An equally crucial phase is developing exit strategies. These strategies help investors minimize risks and maximize profit when it's time to turn those shares into cash. Some might think it's only about buying low and selling high, but that's merely skimming the surface. Understanding when and how to exit an investment can often determine the overall success of one's financial journey in an unpredictable market like Shanghai.
Timing the Market
Identifying Exit Points
Knowing when to sell is not just intuition; it involves a blend of analysis and market understanding. Identifying exit points is crucial because it allows investors to lock in profits before a potential dip. One key characteristic of identifying exit points is employing a strategy known as 'target pricing.' This involves setting a predetermined price at which the investor intends to sell.
In this context, identifying exit points aligns with a disciplined approach to management of investments. Investors can use historical data and market trends to make informed decisions. It becomes a beneficial choice in this article, as it structures the process of exiting, reducing guesswork.
However, the unique feature of this method lies in its risk. Waiting aimlessly for an ideal price can lead to missed opportunities, especially in volatile markets. Investors must be ready to accept compromises based on real-time market conditions. This nuanced understanding of timing often proves advantageous in the Shanghai landscape, where price swings can be drastic.
Adapting to Market Fluctuations
Another key strategy when navigating exit strategies involves adapting to market fluctuations. This element involves being reactive to changes in the market landscape—essentially, it means knowing when to pull the trigger. The main characteristic here is the ability to read market signals. For instance, if there's news affecting industry sectors or even the broader economy, investors need to be adaptable.
In terms of benefits, remaining flexible provides a cushion against losses and can reveal new chances for profit at the right moment. Consider that the Shanghai market can change with breaking news or global events almost overnight. One unique feature of this adaptability is that it helps investors stay relevant and informed. This alignment with current events can lead to better decisions, keeping the pressure off when the market takes a turn.
On the downside, this method requires constant vigilance and can be exhausting. Reactive strategies may lead to panic selling if not tempered with logic and analysis. Hence, it’s crucial to balance between caution and proactivity, ensuring that investors don’t act on impulse but rather on sound judgment.
