borderbreak| CICC: Passive funds drive the overall inflow of foreign capital

If you want to speculate in the stock market, you can see the research report of Jin Kirin analysts.BorderbreakAuthoritative, professional, timely, comprehensive, to help you tap the potential theme opportunities!

Research on Kevin Strategy

Notable changes in global funding this week are: 1)BorderbreakThe EPFR fund data we track show that as of Wednesday, overseas active funds continued to flow out of A shares and Hong Kong stocks, but passive capital inflows were obvious; 2) in terms of connectivity, capital inflows accelerated from north to south this week; 3) global markets, stocks and bonds maintained inflows, money markets turned to outflows; 4) US stocks and developed Europe turned into outflows, while outflows from Japan and emerging markets expanded.

In terms of domestic capital, active foreign capital continues to flow out, and the outflow of Hong Kong stocks expands slightly, but passive capital inflows are obvious, driving the overall inflow of foreign capital. The market continued its upward momentum this week under multiple policy expectations, but the scale of active capital outflows from Hong Kong stocks has slightly expanded, such as global funds and global funds excluding the US, do not rule out signs of profit-taking, but large inflows of passive funds drive overall inflows and spread to more fund types. As overseas Chinese stocks (Hong Kong + ADR) account for a higher proportion in the global index, it also partly explains the greater flexibility of Hong Kong stocks compared with A-shares. In terms of connectivity, north-south capital inflows accelerated this week, with northward capital inflows exceeding 10 billion yuan a day driven by a number of favorable policies on Friday.

In terms of global capital, active foreign capital flowed out of US and Japanese stocks, and the inflow of the Indian market accelerated. As of Wednesday (May 9-May 15), active foreign capital inflows into the Indian market accelerated this week, with overall inflows into the Indian stock market 2.Borderbreak80 million US dollars (vs. Last week inflow 1.BorderbreakFor Japanese stocks, active foreign capital outflows continued to reach 360 million US dollars this week, an increase from last week (vs. Last week, 45.96 million US dollars). At the same time, active foreign investment turned into an outflow of US stocks, with an outflow of about $2.63 billion.

Text

Text

Passive funds drive the overall inflow of foreign capital

Chinese market

Overseas funds: passive funds promote the overall return of inflows, while active funds continue to flow out. As of Wednesday, active foreign capital outflows of A shares continued to reach US $20 million (vs. Last week, US $35 million), while passive funds turned into US $70 million, with an overall inflow of US $50 million (vs. Net outflow of US $140 million last week). At the same time, Hong Kong stocks and ADR overseas funds shifted to inflows of US $30 million (vs. Last week, net outflow of US $80 million), of which active funds continued to flow out of US $140 million (vs. Last week, US $100 million) and passive funds inflows of US $170 million.

Interconnection funds: northward inflows accelerated, banks and non-bank finance increased their holdings. This week (May 13-May 17), northbound capital inflows totaled 8.76 billion yuan, with an average daily inflow of 2.19 billion yuan (vs. From May 6 to May 10, the average daily inflow was 970 million yuan). From a sub-industry point of view, the market value of holdings in sectors such as banks and non-bank finance rose more, while shares in sectors such as household appliances and automobiles fell. In terms of individual stocks, this week northbound funds increased their holdings in targets such as Lixun Precision, China Merchants Bank and Bethel, while reducing their holdings in Midea, Yili shares and Xinyi Sheng.

Southward inflows continued, with mainland banks and insurance leading the way in growth. Southbound inflows totaled HK $18.62 billion this week, with an average daily inflow of HK $4.66 billion (vs. An average daily inflow of HK $2.27 billion during the week from May 6 to May 10). At the industry level, the market value of shares held by mainland banks, insurance and other sectors led the rise. In terms of individual stocks, southbound funds increased their holdings in the Bank of China, Sinopec and China Mobile, while reducing their holdings in CNOOC, HSBC Holdings and Kuaishou-W.

Global market

Cross-market and asset: cross-market: us stocks and developed Europe turn to outflow, while Japan and emerging market outflow expands. From the perspective of active foreign investment, US stocks and developed European markets have flowed out again, while outflows from Japan and emerging markets have accelerated. Of this total, US stocks outflowed $2.63 billion this week (vs. Last week's inflow of $1.09 billion), developed Europe turned to outflow of $510 million (vs. Last week, a small inflow of $15.13 million), Japanese stock market outflow accelerated to $360 million (vs. Last week outflow of $45.96 million), emerging markets continued to outflow $430 million (vs. Last week outflow of $230 million). On the asset side, global equity and bond markets continued to flow in, but money markets turned to outflows.

Allocation ratio: as of March 31, the proportion of active funds allocated to China was about 0.2% lower than the benchmark. Since 2021, the global active fund has shifted from over-allocation to low-allocation for China and India, while South Korea has remained over-equipped and Japan has declined. Since January 2022, the proportion of allocation in China has decreased significantly (- 0.2%), while the United Kingdom (+ 1.1%), France (+ 0.6%) and Japan (+ 0.2%) have received the largest increase. In terms of regional types, funds from Europe are the main outflow; at the plate level, overseas funds are over-matched to China's health care, consumption, semiconductors and hardware, capital goods, and low to the Internet, finance and real estate.

Chart: passive capital inflows drive the overall return of foreign capital

Source: EPFR, China International Capital Corporation Research Department