From the “invincible myth” to frequent breaking, the fund’s attitude towards new shares is changing significantly.
On the one hand, as an important buyer in the new market, the frequent breaking of new shares has significantly reduced the fund’s new income, and the enthusiasm for new shares has also cooled down. In order to reduce the impact of the breaking of new shares on investment income, some funds choose not to participate in the new development, and some funds are adjusting the new development strategy and making positive response.
On the other hand, as a professional institutional investor, public funds also bear the important responsibility of discovering the value and reasonable pricing of new shares. From the previous holding together to lower the price to high valuation, the IPO market-oriented reform under the registration system is putting forward higher requirements for the fundamental research and quotation ability of public funds.
new shares broke frequently, and the fund’s new income shrank sharply
Since the introduction of the “new inquiry regulations” in September last year, the marketization process of A-share IPO pricing has accelerated, and the phenomenon of new share issuance has become more and more common. Especially since this year, with the superposition of market shock and low investor sentiment, the breaking of new shares has reached a small climax in the near future.
According to the data, as of April 22, of the 114 new shares listed on A-Shares this year, 39 shares broke on the first day of listing, with a breaking ratio of more than 34%. Since April, the breaking of new shares has further intensified. 16 of the 28 listed new shares broke on the first day, with a proportion of about 57%. The era of making new and stable profits without loss is gone forever.
As an important participant in offline innovation, the yield of public funds has also shrunk sharply in this round of breaking tide.
The fund manager of a new fund in Shanghai disclosed to the securities times that a public offering new fund with a scale of about 500 million can contribute about 6-8% of the annualized return in previous years. This year, he expects that it may be reduced to 2-3% or cut in half.
Huaan Securities Co.Ltd(600909) Financial Engineering Analyst Yan Jiawei has calculated the monthly new income since November 2021. Under the assumption that all new shares are shortlisted, and based on the average winning rate of offline class a investors (public funds and social security funds), it is estimated that the new income of 200 million scale accounts in November 2021, December 2021 and January 2022 is 1669400 yuan, The new revenue in February 2022 was 189900 yuan, the new revenue in March 2022 was 530300 yuan, and the new revenue in April 2022 was -100400 yuan. The new revenue decreased month by month.
“the core of the future depends on whether the issuing price of new shares is still high. At the same time, we also need to pay attention to the performance of the A-share market. We believe that as long as we make innovations and strengthen, there will still be promising areas in the future.” Said Zeng Wenhong, manager of Nord fund
participation enthusiasm decreased and participation attitude was cautious
The frequent breaking of new shares is greatly affecting the participation enthusiasm of investors. Retail investors and institutional investors are responding to the breaking of new shares with their own practical actions. A number of fund sources said that the number of accounts of the company participating in new development has decreased, the participation attitude has become cautious, and even some funds choose not to participate in new development.
Zhou Ping, general manager and fund manager of Western Lide fund fixed income + investment department, took the data as an example, “For example, we recently saw that retail investors abandoned the purchase of new shares to a new high; for example, from the perspective of offline subscription, the number of accounts participating in inquiry reached 11500 at the peak, which has now decreased to about 75008000, and the overall number of accounts has decreased significantly; in addition, investors also began to judge the quality of new shares, and the number of accounts participating in some new shares is even only about 40005000.”
Zeng Wenhong, the fund manager of Nord, also admitted that the breaking of new shares will indeed have some impact on the enthusiasm of participation. “The quotation in the market is rising, the winning rate is declining, the new income is also shrinking, and the number of products we participate in is decreasing as a whole.”
Yan Jiawei made statistics on the recent fund’s participation in new fund competition from the two dimensions of company level and product level:
From the perspective of fund companies, in the past three months (i.e. from January 2022 to now), there are 57 fund companies with a participation of more than 90%. Compared with the tracking data one month ago (from December 2021 to March 18, 2022, there are 85 fund companies with a participation of more than 90%), the participation of fund companies in innovation has decreased rapidly;
From the perspective of products, the median participation rate of active equity funds in the past three months is 83.12%, the shortlisted rate of inquiry is 64%, the median participation rate of fixed income + funds in the past three months is 71.43%, and the shortlisted rate of inquiry is 62.5%. Some fixed income + funds have taken the lead in withdrawing from the new market.
For a long time in the past, innovation was an important way for fund types such as fixed income + funds and index enhancement funds to increase their returns. In the face of frequent breaking of innovation, many funds had to change their investment strategies, and this change has been confirmed in the first quarterly report just disclosed.
For example, in a quarterly report just disclosed, a fixed income + fund said that since the breaking of new shares has become the norm, the new income has decreased significantly, the central position of the stock has been appropriately improved, and the stock structure has changed from undervalued blue chip to a configuration dominated by industries with tight supply and demand in the necessary consumption, real estate industry chain and new energy industry chain, from relying on the active stock selection and aggressiveness to increase the stock bottom position to thicken the income.
For another example, fof generally participates in innovation through two levels: one is to allocate new fund or fixed income + fund to indirectly obtain new income; Second, build a stock bottom position and directly participate in the subscription of new shares.
However, in the first quarterly report of this year, a fof product wrote, “because new shares are frequently broken, the fund has reduced the stock bottom position in the portfolio to be purchased with new shares, and redeemed the new share strategy fund at the same time.” In addition, some pension fofs with stable style began to reduce the subscription of new shares as early as the end of last year. A pension fof wrote in last year’s fourth quarter newspaper, “in the fourth quarter, considering the decline of new income, the fund will no longer participate in new investment and gradually convert bottom stocks into equity funds.”
develop new strategies, actively respond and pursue effective finalists
Of course, avoiding innovation is only an individual choice made by some funds based on product positioning and investment strategy, and more funds still choose to meet difficulties and respond actively. However, the research on the “public offering” of new shares undoubtedly puts forward higher requirements for the “public offering” pricing ability.
Zhou Ping said that since the breaking of the first batch of new shares after the inquiry of the new regulations, the company has been keenly aware that the income of new shares is no longer risk-free income, and the higher the finalist rate of new shares is no longer the better, and put forward the strategic requirement of “pursuing effective finalist” for the first time, that is, the finalist rate of non breaking new shares should be as high as possible, and the finalist rate of breaking new shares should be as low as possible. The company also takes this as the assessment standard of the new share team.
\u3000\u3000 “The frequent breaking of new shares determines that we must pursue effective shortlisting, which is difficult. We need to conduct in-depth research on the new share market and the subject matter of new shares. When pricing new shares, we not only pay attention to the fundamentals of the company, predict the performance of the company, and price with reference to the reasonable valuation of comparable companies, but also pay attention to the performance of the market and adjust the valuation according to risk preference and micro transaction structure The premium or discount level of the value, taken together to reasonably price the company. ” Zhou Ping specifically introduced.
At present, this strategy is more effective. According to Zhou Ping, under the guidance of pursuing effective shortlisting strategy, the shortlisted income of Western profit in the first quarter of this year was significantly higher than that of all new shares, reflecting the effect of avoiding breaking.
A researcher in charge of research on new shares of a public fund admitted that after the new regulations, the team expected that the price of new shares would increase and may break. The era of “mindless innovation” has ended. Institutions will participate selectively in the comprehensive fundamentals and market sentiment. In the future, the number of institutions participating in inquiry will be significantly differentiated.
The data show that from the offline issuance date, among the 98 new shares placed offline this year, the average number of institutions participating in the inquiry is 755, of which only 181 are the least and 3419 are the most, with a difference of nearly 19 times.
“We believe that due to the gap in investment and research strength among institutions, there will be a significant two-level differentiation in the yield of new shares in the future. Institutions with strong investment and research strength and the ability to reasonably price new shares are expected to have effective new share returns higher than the market average, while institutions without investment and research strength may gradually withdraw from the new share market.” Zhou Ping said.
new share pricing needs joint efforts of multiple parties
Overseas, the breaking of new shares is a common phenomenon in the mature securities market, and the end of the myth of the invincibility of A-share new shares is also a manifestation of the gradual maturity of China’s securities market. But at the same time, the recent breaking of such a high frequency also reflects, to a certain extent, that there are still some pain points in the current new share market.
\u3000\u3000 “At present, there are two main reasons for the breaking of new shares. First, the A-share market as a whole is in the stage of wide range shock, which has the impact of low mood on the first day of new shares listing; second, after the new rules for inquiry of new shares, the current valuation of new shares is relatively high, and there is a high premium compared with the valuation of comparable companies in the same industry in the secondary market. Before the above two reasons are not changed, the breaking rate of new shares will probably be the same It’s a normal phenomenon. ” Zeng Wenhong said.
Zhou Ping further added that at present, there are still some pain points in the subscription of new shares. For example, under the constraint of the elimination ratio of 1% high price in the new inquiry rules, institutions without pricing ability blindly reported high prices to raise the overall valuation level of new shares in order to pursue shortlisting, while institutions with pricing ability may be forced to increase the valuation and pricing of new shares, resulting in the increase of the probability of breaking new shares after listing.
In addition, the excessive pricing of new shares leads to the over raising of the issuer. The over raised funds have nowhere to invest and can only buy bank financial management, which is also contrary to the original intention of supporting the development of the real economy.
“We believe that if we rely on the spontaneous regulation of the market, it may take time for the participating institutions to gradually return to the rationalization of the pricing of new shares, and the breaking of new shares may occur frequently.” Zhou Ping said that the return to reasonable pricing under the new regulations requires the joint efforts of many parties to guide investors to reasonably participate in the pricing and subscription of new shares. Among them, public funds should make contributions to the value discovery of new shares as much as possible, reasonably price and improve the income of new shares by pursuing effective shortlisting.
