On December 30, northbound funds rushed to raise again, with a net purchase of 8.141 billion yuan in a single day. The market of A-Shares in 2021 is coming to an end, but the buying enthusiasm of northbound funds remains. As of yesterday’s closing, the net purchase amount of northbound funds in December has exceeded 84 billion yuan, and the probability will hit a record high of monthly net purchase amount.
Looking back at the beginning of the year, the overseas epidemic has been repeated, and the superimposed major index companies have completed the inclusion of a shares, and the incremental scale of passive funds has gradually reduced. The market generally expected that the scale of northward funds flowing into A-Shares will not expand further in 2021.
However, the fact is that the inflow of foreign capital still maintained an unexpectedly strong trend in 2021: the north capital allocated more than 400 billion yuan of a shares, breaking the net purchase record of about 350 billion yuan in 2019, setting a new high since the opening of Shanghai and Shenzhen Stock connect.
The high-end manufacturing industry represented by new energy has received a substantial increase in positions of northbound funds this year, and Contemporary Amperex Technology Co.Limited(300750) has become the second largest heavy position stock of northbound funds. Looking forward to 2022, it is a new market consensus that foreign capital will continue to allocate a shares. The high growth of China’s economy, the high competitiveness of manufacturing industry and the further deepening and opening of capital market are expected to attract foreign capital to continue to flow in.
since this year, the net inflow has set a record
As of December 30, the net purchase of A-share northbound funds in 2021 had reached 427.595 billion yuan, far exceeding the historical record of 351.743 billion yuan in 2019. Among them, the net purchase of Shanghai Stock connect was 191.697 billion yuan and that of Shenzhen Stock connect was 235.898 billion yuan.
Especially from November 15 to December 19, northbound funds bought net for five consecutive weeks. Among them, the weekly net inflow from December 6 to 10 reached 48.834 billion yuan, setting a historical record for the weekly net purchase of northbound funds. The previous weekly record was in May this year, when northbound funds bought 46.814 billion yuan a week.
It is worth noting that in 2019, MSCI, FTSE Russell and S & P Dow Jones concentrated on or expanded the inclusion factors of a shares. In this context, the northward capital inflow in that year exceeded 350 billion yuan. Since this year, MSCI and FTSE Russell have not further improved the inclusion factors of a shares. This also means that the foreign capital inflow of more than 400 billion yuan this year is not the result of passive funds following the “mechanical allocation” of the index, but active funds are allocating additional A shares.
According to the flow data of foreign funds counted by EPFR, the capital flow monitoring organization, the inflow of overseas funds was mainly passive funds from 2015 to 2020, while the active funds fluctuated more, and the inflow trend was less obvious, which was also consistent with the background of incremental funds brought by the gradual integration of MSCI, FTSE Russell and other large international index companies into the A-share market from 2015 to 2020. Since this year, the inflow of foreign active funds tracked by EPFR has rapidly increased the scale of a shares, and the attraction of Chinese assets in the international market has gradually increased.
the leader of high-end manufacturing industry is favored by foreign capital
Looking back on the trend of warehouse adjustment since this year, the characteristics of the transformation from north capital to growth style are obvious, which also shows that under the background of repeated global epidemic, the competitive advantage of China’s high-end manufacturing industry has been recognized by foreign capital.
From the industry characteristics of shareholding and allocation, the current main positions of northbound funds are still concentrated in consumer stocks, and the large consumer industries represented by food and beverage and household appliances are still the sectors with the highest absolute proportion of foreign holdings.
According to the data, as of December 29, Kweichow Moutai Co.Ltd(600519) still ranked first in the heavy position of capital in the north, with a market value of more than 180 billion yuan. In addition, Midea Group Co.Ltd(000333) , Wuliangye Yibin Co.Ltd(000858) , China Tourism Group Duty Free Corporation Limited(601888) , Inner Mongolia Yili Industrial Group Co.Ltd(600887) also ranked among the top ten heavyweight stocks of northbound funds.
However, from the perspective of trend, the allocation of Chinese manufacturing assets by northward funds has increased rapidly this year. At the end of 2020, new energy leading stock Contemporary Amperex Technology Co.Limited(300750) was the ninth largest heavy warehouse stock of northbound funds. As of December 29 this year, Contemporary Amperex Technology Co.Limited(300750) had jumped to the second largest heavy warehouse stock, with a market value of more than 110 billion yuan. In addition, Longi Green Energy Technology Co.Ltd(601012) also surpassed Wuliangye Yibin Co.Ltd(000858) and jumped to the fifth largest heavy warehouse stock of northbound funds. At present, the electrical equipment industry has become the second largest heavy warehouse stock of northbound funds.
According to the statistics of China International Capital Corporation Limited(601995) , in 2021, most of the northward incremental funds flowed into the midstream manufacturing industry. Among the net purchases of more than 400 billion yuan, more than 100 billion yuan flowed into the electrical equipment industry, and the chemical and electronic industries also received net purchases of 56.7 billion yuan and 47.2 billion yuan respectively. In contrast, the food and beverage sector with weak performance and high valuation during the year showed a net outflow of 14.8 billion yuan, which is the industry sector with the largest outflow.
In addition to buying electrical equipment, chemical industry, electronics and other manufacturing sectors, foreign capital also chose banking, computer and medical sectors with more adjustment against the trend in 2021. According to the data, the banking, computer, pharmaceutical and biological sectors received net northward capital inflows of 43.6 billion yuan, 39.5 billion yuan and 31.6 billion yuan respectively during the year.
strictly control “fake foreign investment” and benefit “real price investment”
At the regulatory level, on December 17, the CSRC publicly solicited opinions on Amending the provisions on the trading interconnection mechanism between the mainland and Hong Kong stock markets (hereinafter referred to as the “new regulations”), made it clear that “Shanghai and Shenzhen Stock connect investors do not include mainland investors”, standardized the return trading behavior of mainland investors, and strictly supervised the so-called “fake foreign capital”.
Market views generally believe that the scale of “fake foreign capital” is small, and the new regulations have little impact on the market. In the long run, strict control of “fake foreign capital” will help promote the continuous standardization and transparency of the capital market and help the high-level two-way opening of the market.
According to the analysis of China Industrial Securities Co.Ltd(601377) Research Report, the northbound funds can be divided into foreign banks (allocation plate), foreign securities companies (trading plate) and Chinese institutions through the type of custodian institutions disclosed by the Hong Kong stock exchange. Among the three types of funds, some so-called “fake foreign capital” may exist in the funds entrusted to Chinese funded institutions with high transaction frequency.
China Industrial Securities Co.Ltd(601377) said that in terms of the proportion of the three types of funds, at present, the northbound funds are mainly allocated and the proportion has increased steadily, the proportion of trading has continued to decline, and the proportion of Chinese funded institutions is small. In recent years, the proportion has been stable within 5%, and most of them are not “fake foreign capital”. In terms of the total amount, the volume of “fake foreign capital” is very small, and strict supervision will help to further clarify the “foreign capital” attribute of northward funds.
Kang Chongli, vice president of YueKai Securities Research Institute, said that “real price investment” will not be affected by the withdrawal of “fake foreign capital”. He believes that since the opening of the Shanghai Shenzhen Hong Kong stock connect mechanism, the overall operation has been stable and has played a positive role in expanding the two-way opening of the capital market and introducing long-term overseas funds. The new regulations will help to further improve the mechanism of Shanghai Shenzhen Hong Kong stock connect and facilitate foreign investors to invest in the A-share market.
in 2022, foreign capital will continue to embrace Chinese assets
Looking at the extended time cycle, although fluctuations occur from time to time, the continuous inflow of foreign capital is still a trend direction. Looking forward to 2022, most institutions are optimistic about the inflow of northward funds: even after several years of continuous inflow, the current shareholding ratio of foreign capital in A-Shares is still low, China’s economic growth is still resilient, the advantages of manufacturing industry are “emerging”, and there is still room for further expansion of foreign capital inflow in the future.
Zhang Yidong, a global strategic analyst, firmly said that foreign capital will continue to embrace Chinese assets next year. On the one hand, the RMB exchange rate is expected to remain strong in 2022, which is conducive to overseas investors’ allocation of China’s high-quality assets; On the other hand, in recent years, the high-level opening-up of the capital market has been promoted in an orderly manner, and its attraction to foreign investors has been continuously improved.
In Zhang Yidong’s view, the investment idea of “mean return” of foreign capital deserves attention, and investors are suitable for defensive allocation next year. First of all, we can pay attention to the restorative market of the average return of industry prosperity, including social service industry, airport industry and other fields damaged by covid-19 epidemic, as well as the return of pig cycle; Secondly, we can pay attention to the restorative market of valuation mean regression, and the undervalued sectors such as real estate and finance are arranged on the left.
Citic Securities Company Limited(600030) it is predicted that the net inflow of foreign capital next year will continue to increase compared with this year: on the premise of stable RMB exchange rate and no new index, northbound funds are expected to buy 400 billion yuan in 2022. Liu Jinjin, chief China equity strategist at Goldman Sachs, said that it is expected that about US $75 billion will flow northward into A-Shares in 2022.
(Shanghai Securities News)
