The A-share new force is gathering hundreds of billions of foreign funds each year to invest in the market?
Economic Observer reporter Zheng Yizhen reports from Beijing that if “European stock god” Anthony Bolton can enter the Chinese market later, perhaps his investment strategy will not be defeated by the “immature market” at that time.
After all, a generation of stock gods can’t compete with the entire market. Six years after Anthony Bolton exited the Chinese market, foreign countries gathered in A shares are participating in the Chinese stock market and undergoing a structural change.
After 4 am on September 7, the S & P Dow Jones Indices announced a specific list of A shares.
The list went into effect on September 23, and more than a thousand A shares were allocated to S & P Dow Jones’ six major index families.
The market is holding its breath looking forward to September 23rd. On the same day, FTSE Russell also raised the A-share replacement factor from 5% to 15%. The two major international indexes attempted to bring A-shares more than $ 5 billion in incremental funds.
At that time, A shares will formally merge the three major global index companies-MSCI (Ming Sheng Index), FTSE Russell and S & P Dow Jones.
The scale of foreign admissions brought by the three major indexes this year is expected to reach 100 billion yuan.
At present, every expansion of the A-share international index affects the nerves of the market.
The recent expansion of MSCI on August 27th brought tens of billions of capital inflows to A shares within three minutes of the end of the market. The rare “pulse market” made the market look at foreign big moves.
In the A-share market, the foreign stock market value has quickly caught up with public offerings, and insurance capital has approached the trend of tripartite triumphs, and is expected to be on par with public offerings by the end of this year.
Shanghai-Hong Kong Stock Connect opened in 2014, and Shenzhen-Hong Kong Stock Connect opened in 2016.
Since the exclusion of MSCI from A shares in 2018, they have swarmed in with foreign scale and speed.
In the first half of 2019, the net inflow of Beishang funds has reached 149.6 billion yuan in A-shares. The A-share split between FTSE Russell and S & P Dow Jones will also be launched this year.
The size of foreign allocation of A shares has soared from about 300 billion in 2013 to 1 in the middle of this year.
65 trillion, has become the most important source of incremental A-share funding in recent years.
As of the end of June, public equity funds held a stock market value of 2 trillion yuan, of which only a difference of more than 350 billion US dollars.
Fortunately than Anthony Bolton, for the current foreign institutional investors, they are ushering in a new wave of opening up in China’s financial industry.
Including expanding the Shanghai-Shenzhen-Hong Kong Stock Connect quota, researching and expanding QFII and RQFII access conditions and investment scope, discussing how to improve the holder’s equity ratio and the intensive introduction of various open policies, continue to increase.
As the A-share market ushers in the “Golden Nine, Silver and Ten” market, the State Council’s Financial Stability Development Committee has again adjusted the A-shares, and it is necessary to solidly cultivate various types of institutional investors, create good conditions for more long-term capital to continue to enter the market, establish a good market ecology, and strengthenThe vitality, benefits, and service capabilities of the capital market have truly become a “booster” for economic growth and development.
In the next five to ten years, foreign shares in A-shares are expected to reach 10%, truly becoming a new force that cannot be ignored in China’s stock market.
At this point in time, styles and trends that have not appeared in the A-share market have appeared before—for example, large-cap stocks have consistently outperformed small-cap stocks for three consecutive years, retail shares have continued to decline, and transactions have become increasingly concentrated.
From short-term speculation to long-term investment, the path of Chinese investors’ A-share asset appreciation is quietly changing.
Domestic and foreign dances Since the end of 2015, the trend of large-cap stocks outperforming small-cap stocks has continued for about three and a half years, the longest record since 2005.
Comparing the South Korean and Taiwan stock markets, since MSCI completely separated them, large-cap stocks have continued to outperform, and there have been almost no major style changes.
Such a change is difficult to predict for domestic investors.
An analyst at a large brokerage firm in Beijing remembers that when he went to a Shanghai fund company for a roadshow in 2015, he mentioned that a TMT stock had already come to an end, and the fund manager rejected it on the spot “without imagination, it can go up 10 times”.
Now, the old stars of GEM, such as LeTV and Stormwind, have fallen, and the blue-chip stocks have become the market’s sweet spot.
Consistent with this trend, after the Shanghai-Shenzhen-Hong Kong Stock Connect opened one after another in 2014, foreign countries continued to grab large-cap blue chips, especially large consumer stocks. The computer sector responded flatly to the technology that many domestic institutional investors are keen on.
Under the recent expansion of the A-share MSCI and FTSE Russell, and in addition to the many positives of the S & P Dow Jones Indices, the Shanghai Stock Connect closed a net purchase of US $ 5.5 billion on September 6, and until September 6, the Shanghai Stock Connect has been continuousNet buying on the 7th trading day.
Foreign accumulation has lowered expectations of lowering standards, and A shares have also ushered in the “Golden Nine Silver Ten” market. Since September 2, A shares have risen for five consecutive times. The Shanghai Composite Index once stood at 3,000 points, and the GEM index once exceeded 1700 points.
On the evening of September 6, we gradually lowered the quota and decided to reduce the deposit reserve ratio of financial institutions to 0 on September 16, 2019.
Five exemptions (excluding finance companies, financial leasing companies and auto finance companies) are expected to release 900 billion funds, and the market’s profit-making effect is further highlighted.
The foreign exchange flowing into A shares following the three major index companies is divided into active funds and passive funds.
After the first phase of FTSE Russell is completed (that is, in March next year, a division factor of 25%), China A shares are expected to weigh about 5 in the FTSE emerging market index.
36%, representing that the index alone can bring in a net inflow of $ 10 billion in passively managed assets.
FTSE Russell stated that this is purely passive management of funds and we cannot predict actively managing funds.
Similarly, a large part of institutional investors tracking MSCI are long-term funds such as sovereign wealth funds, insurance funds, social security funds, etc., which have 3-5 years or even periodic allocation requirements.
Its investment philosophy is not the same as that of A shares before. Some types of investments will have ESG (ie environmental, social and corporate governance) themes. Some investors passively track the index.Large, also brings a closer investment strategy to the A-share market.Overseas institutional investors attach great importance to the comparison with benchmarks, and domestic active funds may pay more attention to indicators such as performance rankings.
On August 27, the proportion of A-shares was increased from 10% to 15%. After the MSCI semi-annual index assessment in November, it was converted to A-shares and the proportion of large-cap stocks increased to 20%. At the same time, mid-cap stocks were replaced by 20%.
MSCI estimates that 80 billion U.S. dollars flowed into A shares last year.
According to MSCI forecasts, the size of global tracking funds for the emerging market 南京桑拿网 index and the global market index is 1, respectively.
$ 6 trillion and 3.
$ 2 trillion.
The Shanghai-Hong Kong Stock Connect opened in 2014, the Shenzhen-Hong Kong Stock Connect opened in 2016, the A-share split in 2018 was MSCI, and the 2019 A-share split in FTSE Russell and S & P Dow Jones.
This part of foreign investment style is increasingly affecting the A-share market.
According to Zhou Hao, senior economist at Commerzbank in Asia, foreign countries have a longer-term view, and the inspection cycle of investment managers is relatively long.
In the process of communicating with foreign investors, you will find that the idea of foreign investment is relatively simple-invest in stocks in this market that cannot be invested in other markets.
Foreign opinions on estimates are also very simple. They are based on three tables of financial statements, looking 佛山桑拿网 at cash flow and expected cash flow.
Some overseas institutional investors will make some assumptions based on the financial report, regularly discuss whether the assumptions are reasonable, repeatedly demonstrate, and be cautious. The number of investment stocks to supplement each year is also very limited.
Foreign countries tracking the index mainly enter A shares through Shanghai-Shenzhen-Hong Kong Stock Connect.
In private equity funds, Hou Anyang, the chairman of Ruo Ruoshui, believes that this part of the Shanghai-Shenzhen-Hong Kong Stock Connect funds prefers performance-driven companies and also prefers Chinese companies with industrial advantages. Therefore, large consumer products such as home appliances and new energy vehicles.
“This wave of stocks selected by foreigners are good targets. They are all companies with high ROE (return on equity) or stable cash flow.
“It is also a large consumer sector. Foreign estimation systems are significantly different from domestic investment.
Guosheng Securities analyst Zhang Qiyao explained that somehow we think that Coca-Cola’s estimates are more expensive than Apple’s. In the foreigner’s estimation system, Coca-Cola has been around for 100 years, but technology companies like Apple and even Nokia have only existed for a few years.It collapsed within a few years, and foreign countries paid more attention to the moat and the determined premium.
Now that foreign countries have gradually mastered the voice of consumer stocks, there will be an increase in the allocation of growth stocks in the future.
However, the investment strategies of foreign and domestic investment are inferior and inconclusive.
Hou Anyang remembered that “European stock god” Anthony Bolton had also been “beaten” with a bruised face and swollen face in Hong Kong.
In April 2011, Bolton established a special situation called Fidelity China, which plans to invest in small and medium-sized consumer enterprises in mainland China within one year.
The target of its investment was frequently struck by lightning. Some Ajisen China and Bawang Group encountered the “Bone Soup Gate” and the “Dioxane Incident”, respectively, and decreased by 34 each year.
53% and 64.
At 08%, Xi’an Baorun was charged with fraud and the combined decline was more than 90%.
Two years after its establishment, the fund has a limit of 14.
In contrast, Anthony Burton had a 28-year annualized return of 19 during the period from 1979 to 2007 when he was in charge of Fidelity’s UK Special Situations Fund.
Zhou Hao said that any model has its own merits. The investment concept is highly related to the company’s culture and genes.
A domestic investor advocates the investment concept of “Hurry up and catch up”.
In many foreign countries, investors often invest. Vanguard, the world’s largest public fund, makes ETFs on a large scale, and some companies are more willing to dig out individual stocks.
But it is certain that the long-term performance returns of institutional investors are much higher than those of retail investors, because their strategies are fixed and do not easily follow the wave.
Hou Anyang believes that overseas institutions have long-term studies of some industries that are more profitable, and some consumer industries have advantages here.
Some prejudgments that do not involve China’s national conditions are quite accurate.
There are many non-market factors in the Chinese market. This part of the research on foreign investment is not good at domestic institutions. Domestic institutions, research and listed companies are closer.
However, “For us, foreign investment is not important, and they will not be interfered by when making investment decisions.
“What did foreign invest?
At present, foreign countries enter China mainly through Shanghai-Shenzhen-Hong Kong Stock Connect and QFII / RQFII channels.
QFII / RQFII requires the qualification approval of the CSRC and the quota approval of the SAFE. The advantage is that it can invest in a wider range of A-share targets and can also invest in other products such as bonds.
The Shanghai-Shenzhen-Hong Kong Stock Connect is a direct interconnection between the mainland and Hong Kong exchanges and settlement companies. It has low cost and convenient transactions. Most of the large-cap stocks can be bid. Since the opening of the Shanghai-Shenzhen-Hong Kong Stock Connect, there has been a net inflow of 782.8 billion yuan from the north, of which 439.7 billion yuan is for the Shanghai Stock Exchange and 343.1 billion yuan for the Shenzhen Stock Exchange.
The total market value of Northbound funds was 45 trillion yuan, of which 30 trillion yuan was traded on the Shanghai Stock Exchange and 15 trillion yuan was traded on the Shenzhen Stock Exchange.
As of September 5th, the top ten stocks with the largest value of Shanghai Stock Connect holdings were, in order, Moutai, Guizhou, Ping An of China, Hengrui Medicine, China Merchants Bank, China International Travel Service, Yangtze Power, Shanghai Airport, Yili, Conch Cement and Haitianwei.Industry, are blue-chip white horse stocks.
The largest holdings on the Hong Kong Stock Connect are Midea Group, Wuliangye, Gree Electric, Hikvision, Ping An Bank, Yanghe, Vanke A, Aier Ophthalmology, Yunnan Baiyao and Focus Media.
Northbound funds are mostly in the food and beverage industry.
Guosheng Securities research report data shows that foreign countries are concentrated in the consumer and financial sectors, of which the food and beverage industry is particularly preferred.
As of February 1st this year, Kitakami Capital’s most favored large consumer sectors (food and beverages, pharmaceuticals, biotechnology, and household appliances), followed by the financial industries (banks, non-bank finance). The total positions of the top five heavy storage industries reached 57.
8%, and the largest heavy storage industry food and beverage positions close to 20%.
Some foreign stocks, such as Han’s Laser and Midea Group, have been touched.
The existing regulatory documents stipulate that the sum of all foreign investors’ shareholdings in the A-shares of a merged listed company must not exceed 30% of the total shares of the listed company.
According to Wind data, in terms of Shanghai Stock Connect, foreign holdings of Shanghai Airport accounted for more than 29% of its free circulation, and foreign holdings accounted for more than 20% of its free circulation market value. Founder Securities (rights), Hengli Hydraulics, China National Travel Service, Hongfa, Haitian Flavor, Conch Cement, Moutai, Guizhou, Angel Yeast, Shuijingfang, Zhongnan Media, Yifeng Pharmacy, Haier Zhijia, Yutong Bus.
In terms of Hong Kong Stock Connect, Aier Ophthalmology’s foreign shareholding is close to the upper limit, reaching 29%. In addition, Supor, China Test, China Resources Sanjiu, Yixintang, Boss Electric, Sanhua Intelligent Control, Midea Group and other large consumer stocksThe proportion of shares in free float also exceeded 20%.
For QFII, Wind data shows that as of August 30, 2019, QFII investment quota was US $ 111.4 billion and RQFII investment quota was US $ 693.3 billion.
The semi-annual report just concluded shows that at the end of the second quarter, QFII appeared among the top ten shareholders of tradable shares of 293 companies. From the perspective of shareholding, QFII has priority over finance and the consumer industry is also in its favor.
The top ten stocks held by QFII are Bank of Beijing, Bank of Nanjing, Huatai Securities, Bank of Ningbo, and Baotou Iron & Steel, China Construction, Midea Group, Haier Zhijia, and Jiangsu Leasing.
And the largest increase in warehouses are China Construction, China Merchants Shipping, Bank of Ningbo, WuXi AppTec, Hainan Rubber, Han’s Laser and so on.
In the second quarter, non-bank financial stocks Huatai Securities and Oriental Wealth increased the most in QFII. Among them, Citi Global Financial Corporation bought a large amount of 8.
2.5 billion Huatai Securities, accounting for 13% of outstanding shares.
In addition, consumer stocks-Jiajiayue of the supermarket chain, tissue paper Zhongshun Jierou, and intelligent home appliances intelligent Sanhua Zhikong also received more than 10 million new QFII purchases.
For the high-end rising liquor sector, many foreign investors chose to make a profit.
Among the stocks that suffered liquidation or reduction in the second quarter, there were too many liquor companies.
Shuijingfang was cleared by Goldman Sachs, and more than 9 million shares were sold in Maotai, Guizhou. Liquor companies such as Yanghe shares, Jinhui liquor, Wuliangye were also reduced by QFII.
In addition, the largest reductions in QFII are Baosteel, Haier Zhijia, Industrial Fulian, Hytera, Tonghua Dongbao and Zhongtai Chemical.
The companies that were cleared by QFII include Hikvision, China Merchants Highway, Tiandi Technology, Ningbo Port, Sun Paper, Jinzhengda and other companies.
UBS Securities believes that in the long run, overseas investors have always preferred consumer sectors such as food and beverages and durable consumer goods.
However, overseas investors are also paying close attention to the estimates in the medium term. In the second quarter of this year, they reduced their holdings of food and beverages estimated to be above the historical average.
In terms of individual stocks, the flow of funds to the north indicates that foreign investors favor stocks with large market capitalization and strong liquidity.
The types of stocks are characterized by high ROE, high dividend yields and low P / E ratios.
According to our exchanges with overseas investors, they favor leading and unique companies that are competitive and unique, as well as companies that have a comparative advantage in estimating and profitable growth globally.
Indeed, foreign investment strategies have always been to buy only one dragon but not two.
Guosheng Securities analyst Zhang Qiyao said that some foreign countries have always liked to buy Shanghai Airport, and they started to buy Baiyun Airport only after it was full.
Of the 28 Shenwan Tier 1 industries, the largest foreign holdings are 20 of which are absolute industry leaders (the largest market capitalization).
The rest are basically leading companies in segmented industries.
Changes in the long-term data show that until the end of the second quarter of 2019, foreign investors’ A-shares held stock market returns.
65 trillion yuan, compared with 1 at the end of 2018.
15 trillion yuan, an increase of 43%, accounting for the total domestic market value and free circulation market value3.
1% and 7.
Guosheng Securities Research reported that in 2019, A shares will be officially divided by the FTSE Russell Index, and the replacement factor in MSCI will be increased to 20%. If it can be landed as scheduled at the same time, it is expected to bring about an increase of about 400 billion.In the long run, Taiwan, Japan, South Korea and other overseas markets account for foreign exchange. If the foreign shareholding ratio reaches 10%, it will bring about 4 trillion incremental funds; further, if the excess shareholding ratioIf it can reach 15%, the scale of incremental funds will reach 6.
68 trillion yuan.
With the expansion of foreign power, the historical proportion of A-share retail investors is high, and the trend of serious speculative market distortions has been reversed. The two A-share markets have shown significant changes-institutionalization and internationalization.
According to the CICC Research Report, the proportion of individual investor holdings in the total market value has dropped from 28% in 2014 to 21% in 2018, and the proportion of individual investor holdings in “free market capitalization” has fallen from 2014.72% fell to 53% in 2018.
At the same time, the proportion of A-share institutional investors is also steadily increasing.
The data of CICC Research show that the proportion of institutional investment holdings in the total market value has increased from 11% in 2014 to 19% in 2018, and the proportion of institutional investors’ holdings in “free market capitalization” has increased from 201428% rose to 48% in 2018.
Private equity funds, insurance, and public equity funds (excluding shares held by insurance, social security, annuities, etc.) are the types of domestic institutional investors holding the most shares, accounting for about 9 of the free float market value.
Foreign holdings through QFII and Interconnect account for about 6 of the free float market capitalization.
7% is the third largest institutional investor category.
Continued foreign inflows have had a significant impact on A shares.
Wang Hanfeng, chief strategy analyst of CICC, explains these changes from four dimensions.
The first is that the influence of fundamental factors of A-shares has increased. In recent years, fundamental factors such as ROE, profit growth, and valuation have explained the excess returns of stocks, while the role of speculative factors has decreased significantly.
Second, the blue-chip stocks continued to outperform.
Third, the estimated premiums for small and medium-cap stocks have narrowed. Since 2016, the estimated premiums of small- and mid-cap stocks relative to large-cap stocks have narrowed to historical lows.
Fourth, transactions are increasingly concentrated in the “leading position”. In 2018, the top 1% of A-shares accounted for 15% of the market’s total transaction volume, the highest since 2009; the 30% of A-shares after the transaction accounted for the market.The percentage of transactions was 6%, the lowest since 2009.
FTSE Russell said that many investors in China’s A-share market are retail investors and short-term investors, and they value short-term returns.
With the improvement of China’s level of opening up and the implementation of international indexes such as FTSE Russell divided by A shares, the medium and long-term investment methods of foreign institutional investors will bring more stability to the Chinese capital market and make the A share market moreRationality will also bring the concept of diversified asset allocation to Chinese investors.
By contrast, in the economies of South Korea and Taiwan, foreign allocation has reached a weight of 15% -30%. Now foreign countries have entered a stage of mutual flows.
In the ten years when foreign countries entered the market, the turnover rate and change rate of South Korea and Taiwan have decreased significantly. The value and institutionalization of the entire market is obvious. The two markets have not experienced a major style switch.Large-cap stocks continue to outperform, and in the past, A-shares often switched between small and large-cap styles.
In addition, the correlation between South Korea, China Taiwan stock indexes and the US market has greatly improved.
Zhang Qiyao said that from many Taiwan and South Korean foreign stocks with relatively high foreign shareholdings, like Samsung and TSMC, it can be found that the foreign exchange shareholding ratio and the existence of correlation are much higher than the correlation with the company’s profit, while a large numberDue to fluctuations in the company’s short-term profitability for one or two years, the company will increase or decrease the allocation.
A shares are also undergoing similar changes, and the correlation between A shares and US stocks has also increased over the past few years.
Foreign investment targets and investment strategies have become one of the benchmarks of A shares.
The fundamental mechanisms are strengthening the rich inflows, helping A-shares to build a more rational market.
In April last year, the Securities Regulatory Commission will quadruple the Shanghai-Shenzhen-Hong Kong Stock Connect quota and the interconnection mechanism will be further improved. In January this year, the Securities and Futures Commission will openly solicit opinions on relaxing QFII and RQFII access conditions and investment scope. In March, the Deputy Chairman of the Securities and Futures CommissionYan Qingmin stated that he would conduct a co-ordination study on the issue of the high proportion of shares held by researchers. In June, the CSRC stated that it would open and open private placements to invest in the Hong Kong stock market through the “Hong Kong Stock Connect”; in July, the supervision would cancel securities internally in 2020,Fund management and other companies’ foreign share ratio restrictions.
As reported by the Securities and Futures Commission in August this year, as global trade frictions intensified, in response to market doubts beyond China, the momentum of foreign exchange investment in A-shares gradually weakened, the Securities Regulatory Commission expanded and even opened the capital market to the outside world, and accelerated the improvement of the securities servicesOpen policies, improve the rules and regulations for foreign investors to participate in the A-share market, effectively protect the legitimate rights and interests of various investors, and promote the steady and healthy development of the capital market.