In order to increase the opening of the domestic market to the outside world, China officially implemented the land stock link system in November 2014. With the full deployment of the land stock connect system in 2017, land stock connect has gradually replaced QFII / rqfii and become the main channel for foreign capital to enter a shares. Since the opening of land stock connect, as of December 31, 2021, a total of more than 1.6 trillion yuan of funds have net flowed into the A-share market through the holding channel of land stock connect.
In 2021, the process of northward capital distribution in the A-share market accelerated again, realizing a net inflow of 432.169 billion yuan in the whole year, including 193.727 billion yuan in Shanghai Stock connect and 238.442 billion yuan in Shenzhen Stock connect. The annual cumulative net inflow increased by 106.85% year-on-year compared with 2020, the largest annual net inflow since its opening.
In terms of monthly net inflow, northbound funds mainly realized large-scale net inflow in the first half of 2021 and December. In December, northbound funds accelerated the layout of the A-share market, and the monthly net inflow reached a record high. Among the net inflow of 432.169 billion yuan realized in 2021, the monthly net inflow in three months exceeded 50 billion yuan, contributing 45.67% of the net capital inflow of the whole year. In December, the net inflow was the highest. The cumulative net inflow of land stock connect reached 88.992 billion yuan, a record high, of which the net inflow of Shanghai Stock connect was 58.111 billion yuan and that of Shenzhen Stock connect was 30.88 billion yuan.
As an important allocation channel for foreign capital, as of December 31, 2021, among the market value of about 2.9 trillion yuan held by foreign capital in the A-share market, land stock link held about 2.74 trillion yuan, accounting for more than 90% of the value of foreign capital in the stock market, maintaining the importance of foreign capital holding channel. Lu Gutong’s shareholding accounted for 3.66% of the market value of circulating a shares, a slight increase of 0.07 percentage points over the previous year, and its influence on A-Shares continued to rise.
From the perspective of fund coverage, as of December 31, 2021, the number of shares covered by funds from the North reached 2360, continuing its level of accounting for more than 50% of the number of a shares. Specifically, there are 1011 Shanghai Stock connect and 1349 Shenzhen Stock connect, accounting for 49.75% and 52.47% of the total A shares listed on relevant exchanges respectively.
In 2021, 144 new shares of land stock connect were added, covering industries such as basic chemical industry (24), electronics (23), medicine (21), machinery (19) and computer (12). As of December 31, 2021, the market value of the newly added shares of land stock connect in the whole year totaled 43.733 billion yuan, accounting for a high proportion of Qingdao Haier Biomedical Co.Ltd(688139) , star Peninsula, Zhejiang Hangke Technology Incorporated Company(688006) and Shenzhen Transsion Holdings Co.Ltd(688036) , and the market value of shares accounted for more than 10% of its free circulation market value.
northbound capital industry allocation
In terms of absolute capital allocation, in 2021, northward capital prefers food and beverage, power equipment, new energy, medicine, electronics and other industries. As of December 31, 2021, BEIXIANG capital held 392.068 billion yuan in the food and beverage industry, 367.843 billion yuan in the power equipment and new energy industry, 267.601 billion yuan in the pharmaceutical industry and 209.244 billion yuan in the electronics industry.
From the perspective of the ratio of North holding to the market value of free circulation A shares, it still occupies a high weight in the home appliance and consumer service industries. Specifically, the home appliance industry (20.41%), consumer service (16.07%), food and beverage (12.96%), building materials (10.76%) and power equipment and new energy (10.65%) ranked among the top five, accounting for more than 10%.
From the perspective of industry dynamic allocation, the market share of power equipment and new energy industry has increased significantly, with a significant increase of more than 200 billion yuan from 159.095 billion yuan in 2020, and the proportion of capital allocation has increased by more than 6 percentage points. In addition, compared with the previous year, the proportion of northbound capital in the computer, power equipment, new energy and banking industries changed greatly, and the proportion of its shareholding in the free circulation market value of A-Shares increased by more than 2 percentage points.
The industry allocation ideas of northbound investors are different from the proportion of free circulation market value of A-share industry. In 2021, northbound funds will continue to be oversupplied with new energy for food and beverage, household appliances and power equipment, and low with non bank finance and national defense and military industry.
As of December 31, 2021, the northward capital allocation ratio of the food and beverage industry was 14.20%, the standard allocation ratio of super free circulation A shares was 5.82%, followed by the over allocation ratio of household appliances of 3.86%. The low allocation of non bank finance was 2.77 percentage points.
In the long run, the difference between the northward capital allocation idea and the free circulation A-share allocation idea has gradually decreased, and the excess ratio of power equipment and new energy has increased significantly. Although the logic of over allocation of food, beverage and household appliances in the North has been established, the proportion of over allocation is declining. In 2021, the oversupply ratio of food, beverage and household appliances decreased by 2.66 and 1.67 percentage points respectively compared with 2020. The oversupply ratio of power equipment and new energy has sprung up, with an increase of more than 3 percentage points in 2021.
From the perspective of industry net inflow, in 2021, northward capital increased significantly, and power equipment and new energy, computer, basic chemical industry, electronics and other industries, power equipment and new energy ranked the top in northward capital increase.
As of December 31, 2021, northbound capital had increased its positions in power equipment and new energy by 103.8 billion yuan, accounting for 23.19% of the increased positions in the whole year, far exceeding other industries, and the intention to layout the industry is obvious. In the four quarters, net inflows of 30.56 billion yuan, 14.003 billion yuan, 26.693 billion yuan and 32.543 billion yuan were realized respectively. Computers (55.366 billion yuan), basic chemicals (52.545 billion yuan), electronics (45.519 billion yuan) and banks (43.445 billion yuan) took the second place. The net capital inflow from the north to the top five industries obtained a capital increment of 67.06% in the whole year.
In the whole year, five industries suffered net sales of funds from the north, of which the reduction of positions in food and beverage was the largest, with a cumulative net outflow of RMB 15.292 billion. In the first quarter, the position decreased significantly, with a total net outflow of 26.871 billion yuan; In the fourth quarter, the share price of the food and beverage industry rose, with a net inflow of 15.884 billion yuan to the north.
allocation of individual shares of northbound funds
In terms of the size of individual stock positions, northbound funds focus on the layout of Kweichow Moutai Co.Ltd(600519) , Contemporary Amperex Technology Co.Limited(300750) and Midea Group Co.Ltd(000333) . At the same time, they have a high shareholding market value and free circulation market value in Shenzhen Mindray Bio-Medical Electronics Co.Ltd(300760) and Midea Group Co.Ltd(000333) . As of December 31, 2021, northbound funds held Kweichow Moutai Co.Ltd(600519) 183.848 billion yuan, accounting for nearly 7 percentage points of northbound capital allocation.
The size of Contemporary Amperex Technology Co.Limited(300750) positions has increased significantly, which is significantly higher than the market over allocation. The shareholding scale of Contemporary Amperex Technology Co.Limited(300750) increased significantly from 44.077 billion yuan to more than 100 billion yuan, and the over allocation proportion increased by 1.51 percentage points to 2.23%.
The characteristics of centralized shareholding of funds in the north are still significant, and the degree of concentration has decreased slightly. The positions of the top 10 target shares totaled 736.999 billion yuan, accounting for 26.70%, and the shares of the top 50 target shares totaled 1495.846 billion yuan, accounting for 54.19%, down about 7.69 percentage points from the end of 2020.
From the perspective of net inflow, northbound funds bought Contemporary Amperex Technology Co.Limited(300750) , China Merchants Bank Co.Ltd(600036) and China stock market news for four consecutive quarters in 2021, with annual net purchases of 35.642 billion yuan, 23.431 billion yuan and 15.207 billion yuan respectively. In the fourth quarter, Contemporary Amperex Technology Co.Limited(300750) alone took a capital increase of 20.616 billion yuan, accounting for nearly 20% of the capital increment of power equipment and new energy industry. The capital increment increased first and then decreased. At the end of December, the North position was significantly reduced, and the net purchases were 6.236 billion yuan (October), 11.532 billion yuan (November) and 2.848 billion yuan (December) respectively.
performance after dismantling of northbound funds
The composition of northbound funds is complex, so it is necessary to further disassemble northbound funds on the basis of existing data. We further divide the northbound funds through the shareholding details of the northbound fund custodian obtained from Hong Kong Central Clearing Co., Ltd. and combined with the total amount of northbound funds. The category of investment institutions is approximately replaced by the category of custodian institutions, so as to complete the classification of northbound funds.
By obtaining the detailed shareholding data of northbound fund custody institutions in the central clearing system of the Hong Kong stock exchange, combined with the daily average transaction price and closing price, the daily transaction amount and shareholding market value change of each stock corresponding to each custody institution are calculated.
The central clearing system divides custodian institutions into several categories, mainly banks and securities companies. In 2021 (from January 1, 2021 to December 31, 2021, the same below), the average market value of positions of banking institutions (institution code starts with “C”) was 2052.272 billion yuan, accounting for 80.66%; The average market value of securities companies (whose organization code starts with “B”) is 492.144 billion yuan, accounting for 19.34%.
In 2021, HSBC Hong Kong and Shanghai continued to lead the custodian institutions with an average shareholding market value of 785.512 billion yuan. Standard Chartered Bank (Hong Kong), JPMorgan and Citibank ranked second to fourth in terms of shareholding market value. These four major bank custodian institutions have a total position of 1980.17 billion yuan, which is the main fund custodian institution of northbound funds.
According to the source of income, we roughly divide the funds in the market into allocation funds inclined to long-term holding and value investment and trading funds inclined to high-frequency trading to earn market pricing error.
In the total volume dimension, the northward fund allocation disk has maintained an overall net inflow since 2021, and the average net inflow of the trading disk fluctuates slightly in both directions. In 2021, the cumulative net inflow of allocated funds was 356.95 billion yuan, and the cumulative net inflow of trading funds was only 26.152 billion yuan. Compared with the market index, the net inflow of trading funds is more related to the market trend, and the fluctuation of trading funds has intensified since October.
From the perspective of monthly net inflow, the time point of net inflow of the two types of funds is significantly different. The allocation disk realized net inflow in each month, which generally showed the long-term allocation to the A-share market. The trading order realized a net outflow or basically remained unchanged in March, April, August and September with a large increase in the allocation position.
In terms of the absolute allocation proportion of funds, the allocation disk and trading disk have a high proportion in the food and beverage, power equipment, new energy and pharmaceutical industries.
Compared with the proportion of free circulation market value of A-share industry, configuration institutions and trading institutions are significantly over equipped with food and beverage, power equipment, new energy and household appliances, and low equipped with non bank finance and national defense and military industry.
Compared with 2020, in terms of absolute allocation ratio, the trading and allocation panels in the power equipment and new energy industries increased by 4.11 and 6.79 percentage points respectively.
In terms of market allocation, the two types of institutions have the largest reduction in the proportion of over allocation of food and beverage, while banks have achieved from low allocation to over allocation, and the allocation speed significantly exceeds the market. Specifically, in 2021, the allocation disk exceeded the allocation of food and beverage by 6.15 percentage points, a decrease of 3.0 percentage points compared with 2020; The over allocation of food and beverage on the trading sector was 5.46 percentage points, down 2.40 percentage points. The allocation disk and trading disk are over allocated to banks by -0.65 and 1.46 percentage points respectively, while in 2020, they are under allocated by 2.80 and 1.95 percentage points respectively.
From the perspective of industry net inflow, the net capital inflow objects of allocation disk and trading disk are different, and the industry allocation ideas are different.
The configuration disk significantly increased the position of power equipment, new energy, computer and basic chemical industries, and realized net inflow in four quarters. Net sales of food and beverage, defense industry and real estate. In the trading session, banks, electronics and basic chemicals were overweight, with net sales of food and beverage, non bank finance and medicine.
Specifically, the net inflow of the configuration panel to power equipment and new energy is 84.031 billion yuan, the net inflow to the computer industry is 43.570 billion yuan, and the net inflow to the basic chemical industry is 33.829 billion yuan. The net outflow was 6.539 billion yuan for food and beverage, 3.191 billion yuan for national defense industry and 2.016 billion yuan for real estate industry.
Net purchases of bank, electronic and basic chemical products were 12.934 billion yuan, 9.331 billion yuan and 9.145 billion yuan respectively; The food and beverage industry had a net outflow of 12.618 billion yuan, the non bank financial industry had a net outflow of 4.718 billion yuan, and the pharmaceutical industry had a net outflow of 4.163 billion yuan.
In a word, there are obvious differences in configuration preferences between trading and allocation disks, whether in the total volume dimension or industry dimension, whether in the stock perspective or flow perspective.
