In 2022, the investment style of northward capital has changed significantly. While increasing positions in finance and cycle sectors, it has reduced its holdings of pre popular tracks such as medicine, computer and new energy.
Analysts pointed out that the popular tracks in the early stage of northbound capital reduction are mainly due to the large cumulative increase and the valuation is no longer cheap, but the industries of some tracks are still in a high growth trend. At the same time, the trend of foreign capital overweight A-Shares represented by northward funds will not change, but the inflow rhythm will change.
inflow rhythm slows down
Compared with 2021, the investment style of northbound funds has changed a lot since 2022. The pace of entering the A-share market has slowed down to a certain extent. In the three trading days of February 11, 15 and 16, the northward capital outflow was 3.7 billion yuan, 3.5 billion yuan and 1.6 billion yuan respectively. At the same time, the data show that the net inflow of northward capital into A-Shares reached 88.9 billion yuan in December 2021 and 43.8 billion yuan in January 2022. The net inflow since February has been only 1.7 billion yuan.
In terms of positions, there are also significant changes in the preferred direction of funds from the north. According to the data, since 2022, northbound funds have begun to increase positions in finance, cycle and other sectors, while reducing positions in medicine, computer, new energy and other sectors. At the end of 2021, the bank sector accounted for only 1.85% of the market value of northbound capital holdings. At present, the proportion has reached 2.07%, and the proportion of pharmaceutical and biological sector has decreased from 3.12% to 2.89%.
In terms of individual stocks, the data show that since February, Ping An Insurance (Group) Company Of China Ltd(601318) has received a net purchase of 1.034 billion yuan, China Merchants Bank Co.Ltd(600036) a net purchase of 774 million yuan, Contemporary Amperex Technology Co.Limited(300750) a net sale of 1.239 billion yuan and Longi Green Energy Technology Co.Ltd(601012) a net sale of 680 million yuan among the top ten active trading stocks of northbound funds.
Chen Xiaoping, chairman of Shanghai Hedao assets, said that the slowdown in capital inflows to the North was mainly due to external reasons. “The global capital market fluctuated sharply, the U.S. inflation data continued to rise, the tightening of the Federal Reserve may exceed market expectations, the yield of U.S. 10-year Treasury bonds rose sharply, and investor confidence was affected.”
hot track opportunities
Over the past few years, the dynamics of northbound funds have been the focus of the market. Does this northward capital reduction, new energy and other popular tracks in the early stage mean that there are little investment opportunities in these sectors in the future?
In this regard, Chen Xiaoping said that the position reduction of northbound funds may be related to the overall market environment. The popular tracks in the early stage of northbound capital position reduction have a large cumulative increase in the history of some stocks in these tracks, and the valuation is not cheap, but the industry of these tracks is still in a high growth trend, and the growth is expected to continue. “Recently, the market has some rumors and concerns about these industries, causing market fluctuations, but these industries still have the opportunity of oversold rebound and the opportunity of individual stocks after differentiation. With the rapid growth of these industries, the competitive environment will change, and companies in some segments may face fundamental pressure. However, there is still much room to improve the penetration of some tracks such as new energy vehicles , some excellent companies will continue to appear in the future, and the beta opportunities in the industry will be reduced, but there are still more alpha opportunities for individual stocks. “
Chen Ziyi, chairman of baichuang capital, said that the fundamentals of some tracks have not changed significantly. The recent significant adjustment is mainly due to the impact of changes in valuation and position structure. “For example, in the power battery track, the underlying share prices of core batteries have experienced a sharp correction, with an adjustment range of 25% – 40%. The market is mainly worried about the competition pattern and the impact of the sharp rise in the price of raw materials on the downstream demand. However, we believe that the market share of leading companies has not reached the ceiling, and there is still room for improvement in the future.”
A shares are still attractive
Wang Xuan, chairman of Chengen capital, said frankly that he was not worried about the recent slowdown of capital inflow to the North: “the speed of capital inflow to the North fluctuates, but the trend remains the same. China’s economy has advantages, and A-Shares are also attractive to capital inflow to the north.”
Chen Xiaoping said that the continuous inflow of foreign capital represented by northward capital in the past decade and the scale reached new highs, mainly due to China’s increased financial opening-up and the increased attraction of China’s capital market to foreign capital. This trend has not changed. Perhaps in the next few years, the intensity of foreign investment will continue to increase. Chen Xiaoping said that fluctuations in the global capital market may affect investors’ risk appetite, but China, as an important economy with the strongest growth power in the world, is bound to attract foreign investment and continue to increase investment. At the same time, the growth of China’s stock market in the past few years has been limited, and the scientific and technological strength and manufacturing capacity of enterprises have been greatly improved, which is obviously attractive to foreign capital.
