Foreign investment is quietly related to China’s innovation.
According to the news from the Hong Kong stock exchange, the trading volume of MSCI China A50 stock index futures, a derivative instrument of China distributed by overseas investors, has reached a new high.
On February 16, the single day trading volume of MSCI China A50 interconnection (US dollar) index futures hit another record, with a single day trading volume of more than 65000, with a nominal amount of US $4.2 billion. Following the record of 51300 contracts traded in a single day on February 15, the nominal transaction amount reached US $3.3 billion, reaching a new high.
As a control, on the first day of listing, a total of 1395 MSCI China A50 interconnection index futures were traded. After more than three months, the trading volume of the stock index futures contract (according to the number of contracts) increased by 45 times.
MSCI China A50 stock index futures is a A-share stock index futures product launched by the Hong Kong Stock Exchange last year. It is also a A-share stock index futures product launched again in overseas markets after the launch of FTSE China A50 stock index futures by the Singapore Stock Exchange in 2006.
Over time, this stock index futures has attracted more and more attention from overseas investors. Institutional investors believe that it is expected to become the second wind vane for foreign investment in China after FTSE China A50 stock index futures.
MSCI China A50 interconnection index futures Underlying Index MSCI China A50 interconnection index gathers core assets such as “Mao and Ning”. Up to now, the top ten heavy positions of the index are Contemporary Amperex Technology Co.Limited(300750) , Kweichow Moutai Co.Ltd(600519) , Longi Green Energy Technology Co.Ltd(601012) , Luxshare Precision Industry Co.Ltd(002475) , China Merchants Bank Co.Ltd(600036) , Wanhua Chemical Group Co.Ltd(600309) , Byd Company Limited(002594) , Will Semiconductor Co.Ltd.Shanghai(603501) , China Tourism Group Duty Free Corporation Limited(601888) , Yunnan Energy New Material Co.Ltd(002812) .
Source: HKEx information
HKEx news: MSCI China A50 connectivity index futures trading volume reached a new high; Source: HKEx Lingying official number.
what does the record high trading volume mean?
Founder medium-term futures financial derivatives researcher Bloomberg believes that there are several possibilities.
First of all, the MSCI China A50 connectivity index futures of the Hong Kong stock exchange is a new variety, which was officially launched in October last year, and the growth of trading volume is a normal phenomenon; Secondly, due to the recent continuous appreciation of the RMB and the geopolitical risks in Europe and the United States, some hedge funds have entered Hong Kong, China to seek hedge opportunities; Third, the valuation of China’s stock market is low in the world, the epidemic prevention and control is the best, and the economic growth is the most stable. There is a great possibility that international funds begin to gradually distribute China’s index. Recently, mainstream investment banks in Europe and the United States have issued more China reports, reflecting the global mainstream institutions’ optimism about China’s stock market, which may boost the trading volume of A50 Index Futures.
Richard Ding, chief executive of golden wise capital management, a Canadian investment institution, also believes that it is normal for the trading volume of new stock index futures to increase over time. Although there is still a certain distance between the trading volume of MSCI China A50 interconnection index futures and that of FTSE China A50 Index futures listed on the Singapore Stock Exchange, it can be seen that its market recognition is rising.
Richard Ding believes that when choosing stock index futures as hedging, investors should first consider the representativeness of the underlying index, and a representative index can really play a hedging role. Secondly, the liquidity of index futures contracts is also very important. With sufficient liquidity, investors can easily find counterparties. Richard Ding recognized the representativeness of MSCI China A50 connectivity index.
MSCI China A50 interconnection Index ETF trend source: wind
Liu Wencai, founder of hedge alliance network, believes that in addition to the above possibilities, the increase in the fluctuation of the underlying index may also be the reason. Since the beginning of the year of the tiger, Contemporary Amperex Technology Co.Limited(300750) , Kweichow Moutai Co.Ltd(600519) and other index heavyweight stocks have increased in volatility, and the overall volatility of the index is also increasing.
It is worth noting that it is also an overseas listed A-share stock index futures. The recent trading volume of its February 2022 contract has not increased significantly compared with that before the year of the tiger.
Source: transaction of February contract of FTSE China A50 Index Futures in Singapore
foreign institutions increase their holdings in China’s new forces of car making
Based on the trading volume alone, it is difficult to see the purpose of foreign capital using MSCI China A50 interconnection index futures. However, combined with other data, foreign institutions are indeed increasing their positions in some of China’s core assets.
Recently, US institutional investors ended the disclosure of positions in the fourth quarter of 2021. Data show that foreign investors still prefer Chinese companies, including new forces in car making.
Source: gurufocus website
Overseas institutions bought 4.79 million shares of Xiaopeng automobile in the fourth quarter and sold 3.52 million shares; Bought 3550000 shares of Weilai automobile and sold 1.07 million shares; Purchase 6.01 million shares of ideal automobile and sell 3.47 million shares. It can be seen that the total amount of institutional purchases exceeds that of sales. In addition, the agency’s purchase of Daquan new energy also exceeded its sales.
While new energy and new energy vehicles have attracted attention, institutional investors are still cautious about Internet companies. Alibaba and pinduoduo sold significantly more shares than they bought.
Goldman Sachs sings more about China
According to the latest research report of Goldman Sachs, China’s Internet and technology stocks experienced the largest correction in history in 2021. However, in 2022, Goldman Sachs upgraded its investment rating in China’s offshore market to “overweight” and maintained its proposal to “overweight” China’s a shares.
The report said that after a sharp correction, Chinese stocks entered the stage of cyclical recovery. After a sharp correction, the cycle of Chinese stocks in the stock market has changed from despair to hope.
Goldman Sachs strategists stressed their view that Chinese stocks will perform better in 2022, on the grounds that stocks falling in 2021 will have buying opportunities under undervaluation and policy support.
In the Research Report on January 6, the team of kinger Lau, chief China market strategist of Goldman Sachs, wrote that although corporate earnings growth is weak and regulatory risks linger, Chinese stocks may be subject to loose policies and valuations are at record lows, and the stock price is expected to rebound and boost. Goldman Sachs expects domestic stocks to rise 13% and overseas stocks to rise 30% in 2022.
The report writes that China may relax its policy in 2022, which is a special case in the world. The bank believes that the most stringent regulatory period for overseas Chinese stocks has passed. At present, the risk of tightening regulation has been well reflected in asset pricing. At the same time, the vie structure and the policy direction of overseas listing of enterprises are gradually clear.
In addition to Goldman Sachs, Fidelity International also expressed in a media interview on February 17 that it is very optimistic about investment opportunities in the Chinese market based on China’s monetary policy and stock valuation.
