Northward capital outflow recently
Northbound capital has recently seen a significant net outflow. The cumulative net outflow of northbound funds in the week from March 7 to 11 exceeded 36.3 billion, which is very rare in history. It has only occurred twice in the past. This week, northbound funds also had a net outflow of a shares, with a net outflow scale of 16.7 billion yuan. At the industry level, food and beverage, non bank finance and pharmaceutical biology outflow more. At the individual stock level, the companies with the highest outflow amount are basically the leaders of various industries.
The rising demand for hedging is the main reason for the sharp outflow of foreign capital. Recently, a series of events, such as the continuation of the conflict between Russia and Ukraine, the overweight of Western sanctions against Russia, and investors’ concerns about the Fed’s interest rate hike and the acceleration of the table contraction process, have greatly increased the demand for risk aversion of overseas investors. At the same time, concerns about China’s economy and policies are also an important reason for the outflow of funds going north.
Will the funds from going north come back?
Large net inflows usually do not occur immediately after large net outflows, but usually return to inflows within a few weeks. Since 2016, there have been seven significant net outflows of funds from northbound. In most cases, after a large net outflow of funds going north, there will not be a large net inflow immediately, but will be separated for a period of time. Usually, after a few weeks, the capital flows northward will resume.
The large re inflow of funds going north is related to the repair of risk appetite. The large net outflow of funds going north is usually related to the sharp decline in risk appetite caused by emergencies. With the mitigation of risk events or the emergence of other positive events, the risk appetite of foreign capital will gradually repair and return to the A-share market.
In the next week or two, funds going north are expected to flow in again. Recently, the risk factors have slowed down. On March 16, vice premier Liu he presided over the meeting of the financial committee of the State Council and responded to the important issues concerned by the capital market in the near future. Affected by this, the market sentiment has been significantly repaired in recent days. It is expected that the funds going north are expected to flow back significantly in the next week or two.
Which sectors are favored when funds flow back to the north?
Food and beverage, banking and non bank financial industries are most favored by funds going north. Judging from the large net inflow of funds from the past seven times of going north after a large outflow, it is most favored by the three industries of food and beverage, banking and non bank finance. In addition, industries that reduce their positions more when funds flow out sharply from the North usually increase their positions more when they flow in sharply later. At the individual stock level, this law is not significant.
From the recent situation, northbound capital is relatively more likely to significantly increase positions in food and beverage, banks, non bank and chemical industry in the future. During the period of substantial outflow of funds from March 7 to 18, the top five industries with the most positions reduced were food and beverage, non bank, medicine and biology, chemical industry and banking. Combined with the historical law, we believe that when the capital going north flows in a large amount in the future, it is likely to significantly increase the positions in the food and beverage, banking, non bank finance and chemical industries.
The configuration direction is suggested to be “stable”
Actively grasp the opportunity of the recent oversold rebound. On March 16, vice premier Liu he presided over the meeting of the financial committee of the State Council and responded to the important issues concerned by the capital market in the near future. After this meeting dispels the risk factors worried by the market in the early stage, the positive factors at the macro and micro levels accumulated in the early stage are expected to gradually dominate the market upward.
In terms of allocation, it is suggested to pay attention to the two main lines of steady growth and consumption. In terms of steady growth, considering the expansion of fiscal expenditure and the requirements of stabilizing the economy this year, building materials, real estate and banks in the direction of steady growth are expected to benefit; Consumption is expected to be restored this year. The new version of COVID-19 is expected to be recovered and classified. The consumption demand is expected to be restored under the line. It is suggested that we should pay attention to the industries such as Baijiu, medicine, household appliances, aviation, airports and so on.
Risk analysis: 1. The level of economic growth is significantly lower than expected; 2. Overseas geopolitical crisis continues to ferment.
