The discussion on “true and false foreign capital” has a long history. Every round of large inflow of funds going north is accompanied by the re mention of the conjecture of “false foreign capital”. As one of the earliest teams to continuously track foreign investment, Guosheng strategy team issued a series of special reports on “the debate between true and false foreign investment” as early as the beginning of 19. Last Friday (December 17), the CSRC announced that it would revise the provisions on interconnection, and Jianfeng pointed directly at “fake foreign capital”. This report will review the past research results and re-examine the current potential “fake foreign capital”, in order to provide some reference for the market to understand foreign capital.
1. How to identify potential “fake foreign capital”? From the perspective of capital logic and behavior, the probability of “false foreign capital” hidden in the northward funds entrusted to Chinese securities companies is high. On the one hand, based on the convenience of fund custody, the funds bypassing the North may tend to choose Chinese funded institutions; On the other hand, the northbound funds entrusted to Chinese securities companies are more closely related to the Chinese market: first, the northbound funds entrusted to Chinese securities companies have a large difference in the rhythm of entry and exit, which may represent funds with different investment ideas; Second, such northward funds are obviously more related to China’s small cap style; Third, there is a higher correlation between the rhythm of such northward capital inflow and the flow of China’s two financial funds, and the “suspicion” of internal and external linkage at the timing level is relatively higher.
2、 What is the preference for the allocation of foreign capital (potential “fake foreign capital”) hosted by Chinese securities companies? Compared with the northward capital subjects hosted by foreign banks and foreign securities companies, there is potential “fake foreign capital” The configuration preference of is expected to show the following characteristics: first, the industry configuration is more inclined to the popular A-share track, which is relatively over equipped with science and technology sectors such as electronics, computer and military industry, nonferrous metals and chemical industry in upstream resources, and Commerce and trade that is expected to reverse the dilemma; Second, stock selection may be more inclined to allocate small and medium-sized targets, focus on mining high growth rate, and have a higher tolerance to valuation.
3. The background and impact of this round of foreign capital “crackdown on counterfeiting”.
Since the establishment of the interconnection mechanism, the discussion of “fake foreign capital” has often triggered discussion, but the impression of the so-called “fake foreign capital” is not only not conducive to the smooth operation and development of Shanghai Shenzhen Hong Kong stock connect, but also to the healthy development of China’s capital market opening to the outside world. Therefore, in order to coordinate financial openness and security, strengthen the supervision of cross-border securities activities according to law, protect the legitimate rights and interests of mainland investors, stabilize market expectations, and maintain the smooth operation of Shanghai Shenzhen Hong Kong stock connect, the CSRC decided to carry out this round of revision to regulate the return transactions of mainland investors and strictly supervise the so-called “fake foreign capital”.
First of all, it is clear that the tightening of this regulation clearly points to “fake foreign capital”, which is not to curb the inflow of foreign capital. China’s capital market opening to the outside world and the further expansion of international indexes are still the general trend; secondly, The so-called “fake foreign capital” accounts for both the proportion of scale (less than 4%) and the proportion of transactions (about 0.1%) are relatively limited, and the revision of the rules not only sets a one-year transition period, but also provides support for RMB exchange. In addition, on the first day after the implementation of the revision, although the northbound funds entrusted to Chinese securities companies are the main force for withdrawal, the range has narrowed compared with the previous day, and the net outflow in a single day is about 1.122 billion yuan. Therefore, there may be pressure on the short-term funds, but it is generally controllable , don’t worry too much. In the long run, the global allocation value of A-Shares continues to highlight. This year, although the expansion of international indexes is suspended and the expectation of tightening overseas liquidity is becoming stronger and stronger, northward capital still flows in sharply and hit a new record. In the future, with the continuous opening of China’s capital market to the outside world, the expansion of international indexes will continue to deepen, and the long-term admission of foreign capital is still the general trend.
Risk tips: 1. Global liquidity changes beyond expectations; 2. The expansion of international index is less than expected; 3. There are errors in the statistical model.
