News from the Financial Associated Press, January 16 (Reporter Huang Jingsi)In the last week before the Spring Festival, the enthusiasm of foreign investors to “sweep goods” in A shares is comparable to that of buying New Year’s goods.
On January 16, the northbound funds continued to maintain the consistent “big money” since the beginning of the year. The half-day net purchase amount exceeded 10 billion, and the full-day net inflow exceeded 15.8 billion, setting a new high for a single-day net purchase within the year. Under the resonance of liquidity and market sentiment, the three major stock indexes collectively rose by more than 1%, the Shanghai stock index regained the 3,200-point mark, and 3,881 stocks in the two cities rose.
Since New Year’s Day, the attitude of foreign capital to increase their positions in A shares with real money can be seen with the naked eye, which can be confirmed by many indicators.
First, among the 10 trading days since the beginning of the year, 9 trading days of northbound funds were net inflows, and only the first day after the festival was a net outflow, and the outflow was in single digits;
Second, the net inflow of northbound funds since January has totaled 79.858 billion yuan, which has achieved a substantial increase from the 13.649 billion yuan in the same period last year with only one more trading day;
The third is that the cumulative net inflow of northbound funds last week was nearly 44 billion yuan, and the net inflow in a single week hit the third highest in history;
Fourth, out of the 10 trading days this year, there were 3 days where the inflow of northbound funds exceeded 10 billion yuan. Last year, this data was zero.
Which industries and individual stocks did the “smart money” buy, buy, buy and buy for half a month? Judging from the market value of northbound capital holdings, the two major tracks are favored, namely, the big consumption benefiting from the optimization of the epidemic policy, and the big finance that is making efforts to supplement the growth. From the perspective of sub-industry holdings, food and beverage and tobacco, capital goods, materials, banking, durable consumer goods and clothing are the five most popular sub-sectors for foreign investors, with a market value of more than 10 billion; while Kweichow Moutai, Ningde Times, China Ping An, Wuliangye and Midea Group have become the top 5 stocks in the market capitalization of northbound funds this year, and the market capitalization of their increased holdings has exceeded 5 billion yuan.
Why are foreign investors optimistic about A shares? The Federal Reserve’s suspension of interest rate hikes, expectations of China’s economic recovery, and the recent continued strengthening of the exchange rate are the three major factors generally mentioned in the industry. Analysts also predict that the accelerated return of foreign capital this year is a high probability event. Looking forward to the market outlook, analysts generally maintain an overall positive and optimistic attitude towards the A-share market, and believe that the injection of liquidity will also help increase the valuation of the A-share market and play a certain role in promoting the market in the first quarter of this year.
In addition, some analysts believe that benefiting from the positive economic outlook, the recent continued strengthening of the exchange rate is also an important factor in promoting the return of cross-border funds. From the end of last year to the present, the RMB exchange rate has rebounded and rebounded. Today, the onshore and offshore USD/RMB rose above the 6.7 mark for the first time since July 2022.
Northbound funds increase positions, finance and consumption
Against the backdrop of cautious capital inflows from the mainland before the festival, the continuous and substantial inflow of foreign capital has become the most important driving force for A-shares. As the vane of A-share value investment, the whereabouts of “smart money” often attracts attention.
From the point of view of the key direction of holdings, the preference of northbound funds is relatively concentrated. Among the top ten industries that have increased their holdings this year, seven of them come from these two tracks, namely food, beverage and tobacco in the large consumer field, Consumer Durables and Apparel, Pharmaceuticals/Biotech and Life Sciences, Healthcare Equipment and Services; and Banking, Insurance and Diversified Finance in the larger financial sector.
Judging from the market value of holdings, in the first 10 trading days of this year, all 24 Wind industries have received different degrees of increase in northbound funds. In the first half of January, the top 5 industries most favored by northbound funds were food, beverage and tobacco (34.684 billion yuan), capital goods (27.740 billion yuan), materials (25.776 billion yuan), banks (14.765 billion yuan), consumer durables and clothing (13.569 billion yuan), and the market value of all positions added is more than 10 billion.
In terms of individual stocks, “smart money” has a lot of love for industry leaders in food and beverage, finance, consumption, medical care, home appliances, and new energy, especially Kweichow Moutai (18.477 billion yuan), Ningde Times (14.466 billion yuan), and Ping An (10.043 billion yuan). 100 million yuan), Wuliangye (8.436 billion yuan), Midea Group (5.483 billion yuan) and other heavyweight stocks. The above are also the Top 5 stocks that foreign investors have increased their market value this year. Interestingly, the Spring Festival of the Year of the Rabbit is just around the corner, and food, beverages, home appliances, clothing and other large-scale consumption are all particularly popular items in the e-commerce New Year’s Festival. From this point of view, foreign “sweeping goods” also reveals a strong New Year flavor.
In addition, what is even more noteworthy is that, as the only representative of the “bull market standard bearer”, Oriental Fortune has also been among the top 10 foreign investors in terms of market capitalization this year, with a cumulative market capitalization of 4.599 billion yuan in 10 trading days this year.
Foreign capital is optimistic about the three major factors of A shares
Foreign capital is optimistic and continues to buy Chinese assets, which has become the most important pricing force in the beginning of the year. Industrial Securities pointed out in a recent research report that it is expected that Beijing Capital will continue to increase its position in A shares, and it is expected to bring a net increase of about 300 billion yuan to A shares in 2023.
Why are foreign investors optimistic about A shares? The Federal Reserve’s suspension of interest rate hikes, expectations of China’s economic recovery, and the recent strengthening of the exchange rate are the three major factors generally mentioned by the industry.
Shao Yu, chief economist of Orient Securities, believes that the two main factors behind this mainly come from the Fed’s suspension of interest rate hikes and the expectation of China’s economic recovery. On the one hand, after the Federal Reserve suspended interest rate hikes, global funds are relatively inclined to risky investments; on the other hand, under the expectation of a global economic recession in 2023, as China’s economic fundamentals continue to recover, the A-share market is relatively more It is easy to obtain excess returns, and arbitrage capital or medium and long-term funds will also prefer markets with more potential.
Landlord Ming, head of UBS Global Financial Markets Department in China, predicts that the flow of capital going north will exceed 200 billion yuan in 2023, which is basically in line with the general situation in history. First, based on the weak economic growth this year, coupled with the peaking of the U.S. dollar, global interest rates are going down, and China has benefited from the economic restart. UBS this year proposed to overweight emerging markets, especially the Chinese market; There are more Hong Kong stocks and A-shares, A-shares account for about 20%, and the remaining 80% are overseas Chinese stocks. “Except for going north, the Hong Kong market may actually be more attractive to the outside world.” Landlord Ming added.
CITIC Securities predicts that foreign capital will become one of the important sources of funds this year. The logic behind it is that after New Year’s Day, the epidemic situation across the country “passed the peak” rapidly, and stimulus policies were frequently issued to accelerate the recovery of the economy. As incremental funds entered the market “preemptively”, market liquidity improved rapidly, risk appetite gradually recovered, and funds continued to actively seek “depressions” to promote the spread of market rotation. However, it is worth noting that it is expected that after the rapid inflow of foreign capital, the pace will slow down, and domestic funds will gradually cover their positions, gradually forming a capital relay effect.
Chen Li, chief economist of Chuancai Securities and director of the research institute, believes that there are four main reasons why foreign investors are optimistic about A shares. First of all, the market has high expectations for the recovery of the economy after the outbreak of the epidemic, and the current valuation of the A-share market is at a low level in the market. At this time, the cost performance of entering the market is relatively high; secondly, the future policy of the capital market is expected to be better; thirdly, the market risk appetite The increase in capital makes capital more inclined to allocate assets in emerging markets, while China’s capital market is undervalued in emerging markets and is more likely to be favored by capital. Fourth, the major indexes in the A-share market have performed well this year, and there is a lot of room for growth in the market outlook.
Chen Mengjie, chief strategist at Yuekai Securities Research Institute, believes that the accelerated repatriation of foreign capital this year is a high-probability event, and the core reason is the restoration of confidence in China’s economic recovery in 2023 and the attractiveness of RMB assets under the dislocation of the Sino-US economic cycle. Externally, after the optimization and adjustment of the epidemic prevention policy, foreign investment banks are generally more optimistic about the recovery of China’s economy in 2023. In terms of fundamentals, the interpretation and recovery of the domestic epidemic has exceeded expectations, bringing positive expectations for economic recovery. In addition, benefiting from the positive economic outlook, the recent continuous strengthening of the exchange rate is also an important factor in promoting the return of cross-border funds.
“Smart money” starts ahead of schedule or boosts market recovery
What kind of market signals will be released by the early launch of “Spring River Plumbing Duck Prophet” and “Smart Money”? What impact will it have on the future direction of the A-share market? From the general point of view of analysts, the injection of liquidity will also help to increase the valuation of the A-share market. For example, Shao Yu, chief economist of Orient Securities, pointed out that with the support of foreign capital and the expectation of more macro policies for economic restoration, this may play a certain role in promoting the market in the first quarter of this year.
The strategy team of China Securities Investment believes that the early start of smart money means that the bottom of the follow-up stage has been proven, and the upward shock is the direction of least resistance. I tend to think that the market has gained sufficient momentum, the bottom of the stage has been proven, and the subsequent upward shock is the direction of least resistance. Recently, foreign capital has become more active in the market, and domestic capital is expected to become the next wave of incremental capital in the market after the Spring Festival.
Through the review of historical data, the strategy team of CITIC Securities found that after the Spring Festival, the concentrated inflow of foreign capital is superimposed, and the market is more likely to rise. It is still a good time to increase positions. It is recommended that the long-term strategic allocation should focus on the “four major security” There are three types of “depressions” in warehouses, focusing on varieties that are in “depressions” and have explosive power after the Spring Festival in the short term.
Looking forward to the future, Fang Dongming, head of UBS Global Financial Markets China, maintains an overall positive and optimistic attitude towards the A-share market. He believes that the current valuation of A-shares is still at a very low level after the rebound, and the continuous injection of liquidity will help the rebound of the A-share market. It brings a good upward range, and it is expected that the profit rebound will reach 15%.” Landlord Ming said.
Chen Mengjie, chief strategist at Yuekai Securities Research Institute, said that for the market outlook, although pre-holiday funds have always tended to be cautious, considering that the market is usually relatively ample in liquidity at the beginning of the year and foreign capital has recently actively entered the market, the market outlook is still “restless in spring”. Suggestions for allocation: First, pay attention to industry sectors with favorable policies set by the two sessions; second, investment opportunities in sectors with better-than-expected performance and relatively flexible fundamentals, such as some daily travel consumption and high-quality targets in the pharmaceutical field.