Under high market volatility: Foreign capital is more proactive than domestic capital | Guotai Haitong Investor Microbehavior Insights Handbook, March, Issue 4

（Source: One View of Market Trends）

Author: Fang Yi / Guo Yin Han / Tian Kai Xuan

Core View: Trading activity in this period declines, while the “making money” effect rises at the margin. From the funding perspective, foreign capital flows in significantly, financing capital flows out slightly, the marginal issuance of stock-focused public funds declines, and foreign capital flows into A-shares and Hong Kong stocks.

Summary

▶Market pricing conditions: Trading activity cools down, while the “making money” effect rises at the margin. 1) Market sentiment (declines): In this period, the market’s turnover rate falls; the all-A-share average daily trading value drops to 2.1 trillion; the number of daily limit-up stocks rises to 81.6; the maximum consecutive limit-up count is 5.5 boards; the board-closure rate rises to 75.4%; the number of names appearing on the stock market’s “Dragon and Tiger List” is 51; 2) “Making money” effect (rises): The proportion of individual stocks that move up rises to 40.7%, and the median weekly return for all A-share stocks rises to -0.8%; 3) Trading concentration: Concentration in primary industries’ trading declines, while concentration in secondary industries’ trading rises. In this period, there are 7 industries with turnover rate percentile ranks of 90% or above; in this period, there are no industries with turnover rate percentile ranks of 99% or above.

▶Capital flows in A-shares: Foreign capital flows in significantly in this period, while financing capital flows out slightly. 1) Public funds: The new issuance scale of stock-focused funds in this period falls to 16.90 billion; the overall stock holdings allocation of public funds declines; 2) Private funds: In March, the private fund confidence index declines by 0.1% versus February; positions increase at the margin versus the prior period (as of 3/6); 3) Foreign capital: Inflow of 670 million USD (as of 3/25); the historical percentile rank of Northbound capital’s trade share (MA5) drops to 38.7%; 4) Industrial capital: In this period, IPO first-issue fund-raising totals 45.8 billion yuan, while the private placement (non-public issuance) scale is 71.5 billion yuan; the future Phase I lock-up share release scale is 293.0 billion yuan; 5) ETFs: Passive funds continue to flow out; net outflow in this period is 10.38 billion yuan; the share of passive trading on a quarter-over-quarter basis rises to 8.3%; industry trading concentration CR5 decreases versus the prior period; 6) Financing: Net selling amount in this period rises to 16.09 billion yuan; the trading value share drops to 8.9%; 7) Retail investors: Alternative indicators show that retail investors’ activity rises at the margin in this period.

▶A-share sector allocation: Financing capital and ETF capital flow jointly into power equipment. 1) Foreign capital: (as of 3/25) Primary industries generally see net outflows; electronic (-39.1 million USD) / power equipment (-20.8 million USD) rank among the top in net outflows; 2) Financing: (as of 3/26) power equipment (+1.48 billion yuan) / utilities (+0.72 billion yuan) rank among the top in net inflows; electronic (-3.33 billion yuan) / computers (-2.76 billion yuan) rank among the top in net outflows; 3) ETFs: Passive funds show clear differentiation at the industry level; power equipment (+3.08 billion yuan) / utilities (+1.42 billion yuan) see net inflows; non-ferrous metals (-4.96 billion yuan) / basic chemicals (-2.47 billion yuan) see net outflows. Among secondary industries, batteries and power see net inflows at the top; industrial metals and semiconductors see net outflows at the top. ETFs with top increases in holdings in this period include the ChiNext New Energy ETF, the CSI 300 ETF, etc.; the Hang Seng Internet ETF / Power Grid Equipment ETF rank among the top in net purchases. Top net redemptions include NA500 ETF and the Non-ferrous Metals ETF; CSI Short-Term Bond ETF / Hang Seng ETF see financing net selling; 4) Funds on the Dragon and Tiger List: Utilities, environmental protection, and electronics rank as the top three sectors on the Dragon and Tiger List.

▶Hong Kong stocks and global capital flows: Southbound capital flows in significantly, while global foreign capital flows in at the margin into the China market. In this period, the Nasdaq index closed down -3.2%; global major markets generally saw more declines than gains; the Korea Composite Index (-5.9%) led the declines. Funding perspective: 1) Southbound capital: Net buying rises to 25.15 billion yuan, ranking at the 71% percentile since 2022 (MA5); 2) In this period (as of 3/25), net capital flows of developed-market active/passive funds are -12.63 billion/-16.69 billion USD; net flows of emerging-market active/passive funds are -9.08 billion/14.60 billion USD. Looking only at the foreign capital definition, global foreign capital flows in at the margin into China; among inflow sizes, China (+13.8 billion USD) ranks among the top. Considering global overall flows including various domestic capitals, Japan/China receive inflows at the top, while US inflows reverse to outflows. Net subscriptions to global funds decrease, and net subscriptions to US stock market financial funds rank among the top.

▶Risk warnings: There may be bias in the data statistics methodology; measurement errors in the data and assumptions; risk of biases in data obtained from third-party institutions.

Disclaimer

Caitong Haitong Strategy Team

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