Main points:
In our last report, "how strong is the alpha of northbound funds?" China has disassembled the investment return of northbound funds since the opening of land stock connect, and found that the long-term return of northbound funds can outperform index and stock funds, and the excess return comes from the reconfiguration industry and stock selection ability. Based on tracking the inflow / outflow of northbound funds, it has a strong prediction effect on the rise and fall of the industry. In this report, we try to build a follow-up strategy for northbound funds in order to find the strategy with the best cost performance for excess return and pullback control.
Building a portfolio based on the top 50 stocks with the market value of northbound capital positions can outperform the overall northbound capital and market benchmark. Based on the two strategies of tracking the change of position market value and net inflow, we try to select different trigger conditions (Top100 / 50 / 30 / 10 or different inflow thresholds) respectively, and find that the strategy of tracking position market value is the best. Since we can get the data (may 2020), the cumulative return rate of the 50 stocks with the largest tracking positions is 31.92%, the excess return is 23.12%, the sharp ratio is 1.34, and the weekly average turnover rate is 2.83%. The strategy has achieved significant excess return on the overall capital of northbound. The cumulative rate of return of northbound is 15.17%, the excess rate of return is 8.76%, and the sharp ratio is 0.93. Although the strategy of tracking the change of net inflow performs better in the rate of return (the cumulative rate of return is 64.29%, and the excess return is 23.23%), it needs an ultra-high turnover rate (91.25%). Therefore, we chose to track the Top50 position strategy, and the verification found that the weekly strategy was significantly better than the monthly strategy.
We try to build an industry tracking strategy based on "50 stocks in the north". Considering that frequent tracking of individual stock position changes may bring high tracking costs, we have constructed the corresponding industry investment strategy according to the industry of the top 50 stocks with the market value of capital positions in the north, bought the corresponding industry index, and set the industry adjustment threshold (when the cumulative change of the proportion of a single industry reaches 4% or the overall cumulative change reaches 10%, we will adjust the position at the opening of the next week). North industry tracking strategy is better than "north 50 stocks". 1) Compared with the northbound industry, the excess return rate of the market is 24.24%, which is better than the excess return rate of 23.12% of the "northbound 50 stocks" strategy. 2) In terms of sharp ratio, the sharp ratio of northbound industry is 1.98, which is better than 1.34 of northbound top 50 stocks; 3) In terms of pullback, the pullback control ability of northbound industry index is also better than others. Its maximum pullback in the past two years is 37.13%, which is significantly lower than 59.80% of "northbound 50 stocks", 56.47% of northbound as a whole, and 51.11% of stock fund index.
The shareholding of northbound industry is relatively stable and the tracking cost is low. In the near future, we need the possible downward adjustment of the industry in which the last stock in the Top50 stock is located. 1) Since the establishment of the tracking strategy, the "north industry" strategy has triggered the warehouse transfer threshold 12 times. See Table 6 in the text for the details of the current industry configuration proportion and historical warehouse transfer; 2) The tracking stability of northbound industry strategy is relatively high. Since December 2021, northbound funds have significantly inflow of 29.494 billion yuan in January and February, and outflow of 32.421 billion yuan in March (as of March 15), while the overall change of positions in northbound Top50 industry is only 2.03%, which does not touch the position adjustment line of the industry. During the period of sharp fluctuation of northbound funds as a whole, the industry tracking strategy can also maintain relative stability; 3) Pay attention to the last 10 stocks of the top 50 in the north, and track whether the change of the current industry exceeds the position adjustment threshold of 4%.
Risk warning: market fluctuations exceed expectations, and the analysis results are calculated based on historical data. There may be data statistical errors, and there is a risk of failure when the policy and market environment change.
