A New Round Of A-Share Market Opening: Northward Fund Allocation "Long Short Divergence"

Recently, A-share stands at 3400 points again, opening a new round of market. At this time, the market style changes frequently and the plate rotates rapidly. This is no longer a long position, but also in the north of the flow of funds.

On August 18, the net outflow of funds from the North was 2.038 billion yuan. Since August, a total of 5.891 billion yuan of capital inflow from the north, including 5.586 billion yuan from Shanghai Stock connect and 305 million yuan from Shenzhen Stock connect. In the 12 trading days since August, the northward capital has net inflow in 5 trading days and net outflow in 7 trading days with frequent in and out.

"Judging from the recent situation, Beishang capital has significantly increased the position of banks, securities, real estate and other sectors, but has started to withdraw from the gem, which reflects that the market has begun to pay more attention to undervalued stocks." August 18, private placement network future star fund manager Xia Fengguang said.

On the other hand, some foreign investors still maintain their usual investment style.

"Our investment style has not changed. No matter how the market style changes or how the plates rotate, we still choose stocks from the bottom to the top according to the alpha strategy, or choose the stocks with growth and abnormal returns, or select the stocks with excess returns of value type. " A person in charge of a wholly foreign-owned private placement in China said.

"Nowadays, overseas investors generally need to allocate more to the Chinese market because they can't put all their eggs in one basket. At the beginning of the year, our company readjusted its strategy and increased its allocation to the Chinese market. 80% of the strategic focus of our stock market is on China. " The person in charge of the above-mentioned wholly foreign-owned private placement in China said.

Investment style switching

In 2020, the allocation of foreign capital to a shares will also change.

Since the beginning of this year, the allocation of northward funds has maintained a relatively stable style, preferring consumption and technology stocks, and increasing foreign investment in the second quarter.

However, Guosheng securities analyst Zhang Qiyao pointed out in the research paper that since June, the allocation behavior of northbound funds has changed significantly, and the main inflow has experienced a rapid rotation of "consumption technology cycle". From the perspective of the net inflow style structure, the large consumption inflow slowed down significantly in June, while the technology growth and cycle style increased significantly.

In the following July, the net inflow of Beishang capital was 10.4 billion yuan, which was significantly slower than that of 52.7 billion yuan in June.

In the first ten days of July, a large proportion of northward funds entered the cycle and finance.

However, since the middle of July, the outflow mode of northward funds has been opened, the consumer sector has been intensively sold off, and the inflow of science and technology and cycle has dropped significantly.

In terms of absolute scale, most industries had net inflows of funds in July. The top five industries with net inflow were non bank finance, electronics, automobile, mechanical equipment and chemical industry. The top five industries of net outflow were food and beverage, leisure service, media, medicine and biology, and light industry manufacturing.

At the end of July, Beishang capital's top five industries were food and beverage, medicine and biology, household appliances, electronics and non bank finance.

Since August, northward funds have reduced the allocation of highly valued pharmaceutical, science and technology, consumption and other industries, and increased the allocation of undervalued financial stocks, real estate and energy industries.

In the first week of August (August 3-august 7), the outflow of capital from Shanghai Stock connect was 4.476 billion, and that of Shenzhen Stock connect was 26 million, with a total outflow of 4.449 billion.

In the second week of August (from August 10 to August 14), the inflow of Shanghai Stock connect was 6.883 billion, and the outflow of Shenzhen Stock connect was 218 million, with a total inflow of 6.665 billion, ending the net outflow for four consecutive weeks.

This week, the industries with higher net buying scale were banking, chemical industry, non bank finance, etc.; those with higher net sales scale were construction materials, non-ferrous metals and electronics. As for individual stocks, the net purchase of Dongfang fortune was the largest, and the net sales of Hengrui pharmaceutical were the highest.

Zhang Ting, a senior Macro Analyst at GESHANG wealth, pointed out that from the perspective of style, recently, Beishang capital has gradually shifted to some undervalued financial cycles, instead of focusing on technology and medical consumption.

However, will this allocation of northward funds become a trend in August?

Xia Fengguang believes that it may take a period of time for continuous inflow to verify, so it is difficult to say that the recent northward capital flow of banks, securities, real estate, etc. will certainly form a long-term market.

Yang Delong, chief economist of Qianhai open source fund, said that in general, Beishang capital has always been biased towards stocks with long-term investment value, most of which are high-quality stocks with good performance. All the top 10 stocks that they flow into are bailongma shares, that is, Baima shares + industry leaders.

"This year, the characteristics of foreign capital inflow are still very obvious white horse stocks. Foreign investors pay more attention to fundamental research, so their investment returns are relatively high and their excess returns are relatively large." Yang Delong said.

Divergent foreign investment

"Recently, the A-share market has shown a certain trend of volatility. Foreign capital flows in and out frequently, rather than one-sided inflow or outflow. This shows that foreign capital is not an iron plate, and at present, they have different opinions on how short they are." Yang Delong said.

Zhang Ting also believes that "the frequent turbulence of Beishang capital indicates that the current divergence of funds on the market is increasing, but the overall net inflow still shows, indicating that there is a certain action of adjusting the position of Beishang capital and choosing industries or individual stocks with higher cost performance ratio to invest."

For example, on August 18, for the largest heavy position shares in Guizhou Maotai, northbound capital divergence was obvious. On the same day, Beishang capital bought 863 million yuan, sold 421 million yuan at the same time, and bought 442 million yuan, which was the second largest stock in the net capital inflow of the day.

In addition, with regard to the recent frequent inflow and outflow of northward funds, some insiders point out that the nature of funds is the dominant factor in determining the pace and style of recent flows. The foreign capital entering the Chinese market can be divided into long-term allocation funds and trading funds.

The long-term allocation funds in foreign capital pay more attention to long-term allocation income, and their allocation style is relatively stable, and they prefer Baima leading stocks; while foreign hot money, or trading short-term capital, has a great fluctuation in style, which basically flows in and out frequently in the last month.

The industry believes that in the long run, the allocation of funds is the mainstream trend. In the medium and long term, such funds will continue to increase the A-share market. However, investors should not blindly follow the short-term position adjustment of trading funds in the short-term northbound funds.

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