Less than 10 minutes after the early opening on March 15, northbound funds sold a net 3.583 billion yuan again. The “flight” of smart money is one of the hottest topics in the recent trend of A-share funds.
As of March 15, northbound funds had been flowing out unilaterally for seven consecutive days this month, with a cumulative reduction of more than 64.5 billion yuan. Among them, the net outflow on March 15 also reached 16.024 billion yuan, setting a new record for the year, which is also the fifth time in the year that the net outflow exceeded 10 billion yuan.
In addition, last week (March 7-11, the same below), the net outflow of northbound funds reached 36.321 billion yuan, the third highest weekly net sales of northbound funds since the opening of the Shanghai Hong Kong stock connect.
According to Caitong Securities Co.Ltd(601108) statistical analysis, including this round, there have been six obvious outflows of northward funds in history:
In July and October 2015, the net inflow in 30 trading days was nearly 70 billion yuan;
In October 2018, Sino US trade frictions heated up, with a net outflow of 19 billion yuan in 13 trading days;
In March 2019, the floating profit was realized, with an outflow of nearly 80 billion yuan in 52 trading days;
In March 2020, the US dollar liquidity crisis, with an outflow of nearly 110 billion yuan in 22 trading days;
Since the conflict between Russia and Ukraine in February 2022, nearly 43.4 billion yuan has flowed out in 13 trading days.
Is foreign capital really withdrawing a shares?
In this regard, brokerage analysts generally believe that although the funds going north do flow out in the short term, they are expected to flow in in the medium and long term. The root cause of the sharp outflow of foreign capital allocation in this round may be affected by the external environment and policy risks.
northbound capital sales hit a new high in a single day
Recent A-share continuous shock adjustment. From February 24 to March 14, the CSI 300 fell by nearly 10%. The transaction volume also showed a contraction. On March 14, the transaction volume of the two cities was 970464 billion yuan, falling below trillion for the first time since March 3.
More noteworthy is the unilateral outflow of funds from the North all day on the same day. On March 14, the net sales of northbound funds reached 14.408 billion yuan, and the single day net sales reached a new high since January 27, including 7.268 billion yuan for Shanghai Stock connect and 7.141 billion yuan for Shenzhen Stock connect.
Based on the industry classification of Shenwan, 24 industries were reduced by northward funds on March 14, of which the net sales of food and beverage were 3.114 billion yuan, the largest among all sectors; Followed by pharmaceutical and biological products, with a net sales of 1.996 billion yuan. The top ten industries with net sales also include chemical industry, leisure services, electrical equipment, non-ferrous metals, non bank finance, household appliances, transportation and computer.
Only four industries gained increased capital holdings from the north, but the leading agriculture, animal husbandry and fish farming also only bought a net 355 million yuan; Net purchases of mining followed by rmb263 million; The net purchases of defense industry and comprehensive industry were only 10 million yuan and 04 million yuan respectively.
At the close on March 15, the net outflow of funds from the North has not stopped. Today, northbound funds sold a net 16.024 billion yuan throughout the day, the second consecutive day of this week, with a net sales of more than 10 billion yuan, setting a new record for the year, including 8.864 billion yuan for Shanghai Stock connect and 7.161 billion yuan for Shenzhen Stock connect.
historically, there have been 6 significant outflows of northward funds
This is the fifth time since 2022 that northbound funds have flowed out of more than 10 billion in a single day. The previous four times occurred on January 27, January 28, March 9 and March 14 respectively, while there were only five times in 2021.
Including March 14, northbound funds have accumulated more than 50 billion yuan of continuous position reduction in recent 6 days, including a net outflow of 36.321 billion yuan last week.
It is noteworthy that the outflow scale of last week not only broke the record of the last two years, but also ranked second only to 41.795 billion yuan in the week of March 13, 2020 and 37.115 billion yuan in the week of July 10, 2015, the third highest weekly net sales since the opening of the Shanghai Hong Kong stock connect.
Looking back on history, including this round, there have been six significant outflows of northward funds China Industrial Securities Co.Ltd(601377) when analyzing the leading reasons, it is believed that the continuous large outflow will occur only when the market has systemic risks and the policy risks are intensified.
The latest and largest outflow is in 2020. According to Caitong Securities Co.Ltd(601108) analysis and statistics, the impact of the epidemic in early 2020, the US dollar liquidity crisis, overseas investors maintained portfolio liquidity, and the net outflow of northbound funds was 110 billion yuan within 22 trading days, which is the largest period at present.
In addition, according to Haitong international review, since 2018, northbound funds have also experienced several monthly net outflows due to Sino US trade frictions and other factors; In March 2020, covid-19 epidemic spread and overseas stock markets fluctuated sharply, resulting in a significant outflow of 67.9 billion yuan of funds going north in the same month; In the second half of 2020, Sino US relations will see waves again, and funds going north will flow out again from August to September.
why did smart money escape
In fact, the signs of a large number of northward capital flight have become more and more obvious this year, especially since March.
“It is influenced by factors such as repeated negotiations between Russia and Ukraine and the spread of the epidemic”, Guotai Junan Securities Co.Ltd(601211) said. As of March 15, the cumulative net outflow of northbound funds in the month had reached 48.501 billion yuan, while previously, northbound funds had been in net inflow for 17 consecutive months.
China Industrial Securities Co.Ltd(601377) said that the biggest marginal change in this round of outflow lies in the reduction of foreign capital’s “long money” in a shares. Different from the substantial outflow of trading disk in January and February this year, but the allocation disk continues to flow in. Recently, the allocation disk and trading disk of foreign capital have turned into net outflow. The allocation disk representing the “long money” of foreign capital rarely has a net outflow for five consecutive days.
“Recently, the confrontation and game between big countries have intensified, the international order has become increasingly complex, and A-Shares are facing more severe external environment and policy risks, or the root cause of the recent sharp outflow of foreign capital allocation.” China Industrial Securities Co.Ltd(601377) analysis scale.
On the one hand, the increased volatility of overseas markets and the risk of stagflation led to the continued hawkish of the Federal Reserve, leading to the phased withdrawal of foreign capital from a shares; On the other hand, more importantly, under the recent conflict between Russia and Ukraine, geopolitical risks and confrontation and game among major powers have intensified, which may become the root cause of the substantial outflow of foreign capital and overseas “long money”.
in the medium and long term, northbound funds will still flow into
The large outflow of foreign capital often brings disturbance to a shares, and the continuous outflow trend in the short term has also aroused investors’ concern about “foreign capital withdrawing from a shares”.
However, many brokerage analysts believe that although the funds going north do flow out in the short term, they are expected to flow in in the medium and long term.
As mentioned earlier, northbound funds have been affected by the external environment for a total of six times, and there have been net outflows in a single month, “but from the annual point of view, from the opening of Shanghai Hong Kong stock connect in 2014 to 2021, northbound funds have been net inflows into A-Shares every year.” Haitong International said that it can be seen that the net outflow in a single month in that year does not affect the trend of foreign capital flowing into a shares. For a long time, the inflow of foreign capital into A-Shares is a long-term trend with great certainty.
China Industrial Securities Co.Ltd(601377) said that in view of the uncertain conflict between Russia and Ukraine, the increased risk of stagflation and the continuous tightening of global liquidity, foreign capital still faces fluctuations in the short term. In the medium and long term, first, the real interest rate difference between China and the United States is still high, supporting capital inflows northward; Secondly, the depreciation pressure of RMB exchange rate is small, so as to improve the cost performance of RMB assets; In addition, the U.S. economy faces the risk of stagflation or even recession. With steady growth, China’s fundamentals are expected to improve, and China’s relatively stable fundamentals and investment environment will also attract sustained inflows of foreign capital.
