Today, the special meeting of the financial committee of the State Council was held to reassure the market with policies, and the rebound market was launched on a large scale. The trend of northbound funds is more affecting people’s hearts today. Surprisingly, although A-Shares rose like a rainbow, northbound funds sold a net 85.38 million yuan throughout the day as of the closing. Although the outflow range was significantly narrowed compared with the previous day, it was still lower than market expectations.
Among them, Yunnan Energy New Material Co.Ltd(002812) , China stock market news and Sungrow Power Supply Co.Ltd(300274) respectively achieved net sales of 744 million yuan, 621 million yuan and 417 million yuan Midea Group Co.Ltd(000333) net purchases topped the list, amounting to 981 million yuan.
Will the capital reduction round continue to be sold to the north China Industrial Securities Co.Ltd(601377) Zhang Qiyao believes that the short-term fluctuation of foreign capital is inevitable, but from the current weekly situation, the outflow of foreign capital allocation disk lasts less than that in 2020, especially from September to October 2020, there was a single week net outflow of northbound funds for six weeks.
However, several times of capital going in and out of the North today have also attracted the confusion of many investors. What happened to the smart money with “long-term thinking”?
In fact, northbound funds are composed of two funds. One is trading funds, whose flow direction is more closely related to the A-share index and is more affected by market risk appetite; The second is the allocation of funds. On the contrary to the transaction type, it is less related to the trend of the index and more stable and continuous admission.
Citic Securities Company Limited(600030) said that the allocation funds account for nearly 70% of the total funds in the north, which is more in line with the behavioral characteristics of “long-term holding” and “value investment”, and may have greater guiding significance for the market and reference value for ordinary investors. Wanjia fund also believes that the phased outflow of funds from the north is a normal market-oriented behavior. In the medium and long term, the advantageous industries and leading enterprises that allocate funds to continuously allocate A-Shares are still high probability events.
market sentiment recovered and the outflow of smart money slowed down
On March 16, the three major A-share indexes soared in the afternoon. As of the closing of the day, the Shanghai Composite Index, Shenzhen Component Index and gem index closed up 3.48%, 4.02% and 5.2% respectively. The turnover of the two cities broke another trillion. On the whole, the market sentiment warmed up, individual stocks in the sector showed a general upward trend, and the profit-making effect was good.
On the other hand, the northbound funds that had previously maintained a firm net outflow trend turned into a long short game today, with increased intraday volatility. On March 16, following the net sales of 2.3 billion yuan in the morning, the northbound funds rebounded sharply with the index in the afternoon, and the net inflow exceeded 3 billion yuan in the 90 minutes of opening. However, it flowed out again in the late trading. As of today’s closing, the northbound funds had sold a net 85.38 million yuan throughout the day, of which the Shanghai Stock connect had bought about 4 million yuan; Shenzhen Stock connect sold a net 86 million yuan.
Although this is the eighth consecutive day of net outflow of northbound funds, from the perspective of net sales scale, it is also significantly narrower than the annual peak of more than 16 billion yuan the previous day, reaching the minimum of net outflow scale in 8 days.
From the weekly dimension, as of March 16 this week, the net sales of northbound funds were 30.515 billion yuan, narrower than the net sales of 36.32 billion yuan last week (March 7-11); From the annual perspective, as of March 16, the outflow of northward capital in 2022 was 43.853 billion yuan, which was significantly lower than that in the same period of previous years.
The positions of northbound funds are mainly concentrated in the “core assets” or heavyweights of a shares. The concentrated selling pressure naturally also brings a direct impact on the recent index. Therefore, the market is more urgently concerned about the extent to which the northbound funds will reduce their positions and how long the selling pressure will last.
Huajin securities analysis said that from the perspective of core assets or heavyweights, most of them have good fundamentals and low valuation, and even some stocks are undervalued. “That means that after the short-term liquidity risk is over, the valuation will eventually return, which may be the source of our confidence in a shares.”
foreign capital allocation is expected to continue to allocate A-Shares
China Industrial Securities Co.Ltd(601377) Zhang Qiyao said that from the current weekly situation, compared with the two rounds of position reduction in 2020, the duration of outflow of foreign capital allocation has been reduced.
From February to March 2020, the epidemic broke out at home and abroad, the US stocks were blown for many times, the international oil price plummeted, the US dollar had a liquidity crisis, and the overseas “long money” continuously flowed out on a large scale. From February 24 to March 19, the net outflow of allocation disk was 47.41 billion yuan; From September to October 2020, the marginal deterioration of China US relations, coupled with the increased uncertainty of the U.S. presidential election, withdrew the allocation disk from the A-share market in stages, and there was a weekly net outflow in six weeks within two months.
Overall, the outbreak of the epidemic and the repetition of “exceeding expectations” are the commonalities that can not be ignored in the previous rounds of configuration disk outflow. It is difficult to avoid short-term fluctuations of foreign capital, but in the medium and long term, the continuous increase of foreign capital allocation sector on A-Shares is the consistent view of many securities analysts.
China Industrial Securities Co.Ltd(601377) Xun Yugen said that at present, similar to October 2018, the impact of foreign capital outflow is amplified when the market incremental funds are small. In addition, although foreign capital has also phased out A-Shares significantly in history, from the opening of the Shanghai Hong Kong stock connect in 2014 to 2021, the northbound capital flows into A-Shares every year, so the proportion of foreign capital in the A-share market is also increasing. However, on the other hand, up to now, the proportion of A-Shares in the global portfolio is still very low. Therefore, in the future, with the rapid increase of the importance of China’s economy in the world, the inflow of foreign capital into A-Shares is still a long-term trend for a long time.
According to the analysis of Guosheng securities, the allocation disk, as the main composition of funds going north, has basically shown a steady inflow trend for a long time, and only a few special cases may have phased outflow. In addition to the pressure driven by the normalized outflow, the core commonality is that they are accompanied by the outbreak of the epidemic or repeated beyond expectations, which leads to the obvious outflow of allocation funds.
Guosheng Securities believes that in the short term, under multiple pressures such as external geographical contradictions, high inflation and tight liquidity, the internal and external epidemic has been repeated more than expected, and the short-term fluctuation of foreign capital is still difficult to avoid. However, in the medium and long term, it continues to be optimistic about the nationalization process of a shares, and the main allocation sector of foreign capital is expected to continue to allocate a shares.
Wanjia Fund said that from the experience of other countries, the proportion of foreign capital in Japan’s stock market was less than 5% in the 1990s and has stabilized at about 30% in recent years; Since 2010, the market value of foreign shares in South Korea has maintained at about 32%. In contrast, the current proportion of foreign investment in A-Shares is only about 3%, which is significantly lower than that in Japan and South Korea, and there is still a lot of room for improvement. As the international mainstream index further increases the weight of a shares, the shareholding proportion of foreign capital will continue to rise.
allocated funds have more reference value
Northbound capital is known as “smart money”. Since 2017, the continuous improvement of its performance has also induced other investors to “copy their homework”, but it has also become part of the reason for short-term market fluctuations.
In addition, the daily inflow and outflow of northbound funds often swipe the screen, especially in today’s several reversals, which also makes many ordinary investors wonder whether the northbound funds labeled as “long-term shareholding” are self contradictory?
Citic Securities Company Limited(600030) in the research report, after penetrating the institutions of northbound funds, it is pointed out that according to the type of custodian institution of northbound funds, two main capital components of northbound Funds – allocation type and transaction type can be disassembled.
Citic Securities Company Limited(600030) analysis shows that the high turnover rate of northbound funds mainly comes from customers hosted by foreign securities companies, which may include some high-frequency transactions of hedge funds, accounting for about 26.3% of northbound funds; The overseas funds that meet the behavioral characteristics of “long-term holding” and “value investment” account for about 67.9% of the whole. Tracking such funds can better reflect the long-term logic of foreign investment and has more reference value. In addition, northbound funds with obvious theme speculative transactions are mostly hosted by domestic securities companies, and their transaction frequency is about 17.3 times that of northbound funds hosted by foreign banks and securities companies.
On the whole, the flow of trading funds is more closely related to the A-share index and is more affected by market risk appetite; The correlation between allocation type and index trend is low, and it is more stable and continuous admission.
In the long run, northbound capital is a firm bullish on the Chinese market. Whether in the hot period or downturn of the market, northbound capital continues to flow into the A-share market, which does not show obvious timing.
Wanjia Fund believes that the phased outflow of funds from the north is a very normal market-oriented behavior. The reasons include the impact of global financial events, holiday capital arrangements, overseas market fluctuations and other events. However, in the medium and long term, with the promotion of the globalization of the capital market by the state and the stable financial growth level of high-quality enterprises in A-share listed companies, the advantageous industries and leading enterprises in which northward funds (especially allocation funds) continue to allocate A-Shares are still high probability events. Through firm “value investment” and “long-term shareholding”, northbound capital has also gained a lot in a shares.
