Unveiling increasingly volatile northward funds: who is buying and selling?

category:Finance
 Unveiling increasingly volatile northward funds: who is buying and selling?


U.S. capital dominates, passive and active development

The first finance and economics reporter has previously reported that there are many types of institutions in Beishang funds, including flexible hedge funds, long-term public funds, etc., as well as some Chinese funded institutions registered in Hong Kong and more speculative individuals.

If we further analyze the specific regional distribution of funds, we will find that although the trade friction continues, the United States is still the largest source of funds, followed by Hong Kong, China and the United Kingdom. Most of the pension and sovereign funds in A-share market come from Norway, Canada, the Netherlands and Singapore.

The regional sources and institutional types of funds going northward

The reporter also learned that the market-oriented funds of the United States will follow the principle of good faith, and it is impossible to give up investment in China because of political factors, and the most important goal is to seek profits. In addition, there is no lack of sovereign funds from Europe and the Middle East in the recent allocation of a shares.

In terms of style, about 20% of the northward funds are passive index funds, and the remaining 80% are active funds. Huang Xiang, China stock strategist at Credit Suisse, told the first financial reporter recently that passive funds mainly follow the pace of MSCI and FTSE Russells expansion and inclusion of a shares, and active capital action can be slow or fast. The reason why funds have become increasingly volatile in recent years is also related to the suspension of inclusion and valuation factors by international index institutions.

However, it is undeniable that with the increasing proportion of included, this has driven the interest of active fund research and layout of a shares. Now both MSCI Emerging Market Index and MSCI China index include A-share, which means that global fund performance reference benchmark also includes A-share, so A-share is no longer an Elective Course , but a compulsory course. Shi bin, head of stock management in China at UBS, told reporters earlier.

Lin Huatang, China stock portfolio manager of LianBo group, told China first finance and economics reporter: different from domestic funds, many of the overseas A-share funds are long-term global portfolio funds or insurance funds. They prefer to look at A-shares from a more strategic long-term investment perspective. Over the past five to 10 years, if A-share is added to the portfolio, it can reduce the portfolio risk and increase the return, so A-share is very attractive to long-term overseas investors. So far this year, a shares have gained the first in the world. According to lufft data, Chinas onshore stock market has led the world in terms of both RMB and US dollar prices, while Denmarks stock market ranked second, while US stocks with a strong rebound were only close to the beginning of the year.

By the sinking of large cap stocks, industry rotation accelerated

From the allocation plate, if calculated in US dollars, 87% of the stocks held by Beishang capital are A-share large cap stocks, and consumption is the sector with the highest proportion. However, with the deepening of understanding, the allocation of foreign capital to the plate is also sinking, and the industry is becoming more diversified.

According to the data of Tonglian, the allocation of funds from Shanghai, Shenzhen and Hongkong stock exchanges for the main board of Shanghai stock exchange accounts for 54.76%, 18.9% for Shenzhen main board, 10.7% for Shenzhen growth enterprise market, and 15.63% for small and medium-sized board of Shenzhen stock market. The industrial allocation proportion from high to low is food and beverage, medicine and biology, household appliances, non bank finance, electronics, banking, electrical equipment, computer, mechanical equipment, transportation, chemical industry, etc.

Large cap stocks account for 75% of the total market value of a shares. International investors are more familiar with large cap stocks, just as the size of offshore ETFs related to A-shares is also concentrated in large cap stocks. In addition to the potential familiarity bias, large cap stocks tend to have better quality and cheaper valuations than small cap stocks, so large cap stocks are more likely to be selected more frequently when foreign investors adopt factor based analysis methods, Huang said.

But this situation is gradually changing. In 2019, FTSE Russell was the first international index company to announce its inclusion in the gem. At that time, a total of 1097 A shares were selected, including 422 mid cap stocks, 376 small cap stocks and 7 micro cap stocks.

In recent years, foreign investors have become more and more interested in A-shares. From the beginning, they only allocated famous blue chips to second-line stocks. The level of research and company coverage are rising. For a foreign-funded institution, even if it only increases the A-shares in the overall portfolio to five, it may need to cover 50 companies, that is, it needs to cover the upstream and downstream of related companies. He said.

In terms of industry, northbound capital has always preferred consumer stocks. However, in the past month, financial stocks received the largest net inflow of funds, mainly driven by investors interest in diversified financial stocks and insurance stocks, and the rotation is also accelerating.

Recently, the speculative of northward funds seems to be increasing. In fact, this is not only because the trend of working from home under the epidemic situation has accelerated the turnover of speculative funds, but also because after the A-share valuation has recovered to a reasonable level, market views have begun to diverge.

Shanghai Investment Morgan told reporters that although the short-term data has improved, the economic recovery rate is weak. In the first half of the year, many economic indicators are still negative, but it is difficult to say that the valuations of many industries and high-quality stocks are not cheap. Therefore, it is difficult to avoid the shock adjustment of the market in the short term.

Although various circles believe that domestic demand is still more certain for the prosperity of the third quarter, while the intermediate reports of infrastructure, technology and some consumer goods are highly certain, but it also depends on the valuation, some of which may have been fully reflected in the stock price. Therefore, it is suggested to take profit from the plate in the previous cycle and increase the layout of enterprises in the later cycle and in the recovery cycle. For example, the proportion of real estate, it, health care, optional consumption and communication industries has been moderately reduced, and the ratio of utilities, materials, Finance (insurance), compulsory consumption and energy has been increased. Huang Xiang said.

Lin Huatang said: in a market with extreme price differentials, the level of value stocks in the A-share market is similar to or even higher than that at the end of 2015. We think that the opportunity of value class will appear again.

Trade friction is not the only factor affecting allocation

In addition, the sharp adjustment of a shares last Friday is related to trade friction, but this is not the only factor for leading institutions to allocate a shares.

Trade frictions increase short-term uncertainty, which is one of our biggest concerns about Chinas market outlook. However, we also emphasize that the recent positive reform of Chinas capital market is a medium - and long-term catalyst, including raising the upper limit of equity allocation of insurance companies, and compiling innovation indexes of Shanghai stock index and science and technology innovation board index. Morgan Stanley China stock strategist Wang Ying told reporters.

The investment manager of a large European asset management company told reporters that with the global liquidity expansion, funds will not be choked off because of a single factor. Therefore, recently, funds are more inclined to adopt the Pinball trading mode, that is, when the global trade situation improves, the capital purchase, market rise and risk sentiment improve; when the situation turns bad, the stock market falls again and defensive strategy It is more advantageous.

With the mid season approaching, Morgan Stanley believes that according to the results forecast released in the second quarter, the profit in the second quarter has a substantial rebound compared with the record low in the first quarter, and the visibility of profit turning point is high. With the gradual recovery of consumption, the profit will gradually tend to normalization.

For most foreign investors, the beneficiaries of short-term economic stimulus, plus the long-term structural winners, are now the best opportunity on a shares. According to the reporters understanding, for example, LianBo has reduced the distribution of Chinas export stocks, and has been fully allocated to the direction of domestic demand since March, the middle is divided into two parts - if the stimulus policy continues to happen, we will increase the sectors that benefit from the stimulus policy and whose valuations are seriously undervalued, such as cement or construction machinery. But at the same time, we also have a layout Structural reform targets, such as data centers, electric vehicles, batteries, 5g, etc Lin Huatang said. Source of this article: Guo Chenqi, editor in charge of first finance and Economics_ NBJ9931

For most foreign investors, the beneficiaries of short-term economic stimulus, plus the long-term structural winners, are now the best opportunity on a shares. According to the reporters understanding, for example, LianBo has reduced the distribution of Chinas export stocks, and has been fully allocated to the direction of domestic demand since March, the middle is divided into two parts - if the stimulus policy continues to happen, we will increase the sectors that benefit from the stimulus policy and whose valuations are seriously undervalued, such as cement or construction machinery. But at the same time, we also have a layout Structural reform targets, such as data centers, electric vehicles, batteries, 5g, etc Lin Huatang said.