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Dong Peng, a reporter from 21st Century Business Herald, reports from Chengdu

The rebound in pork prices continues.

Data from Yongyi Consulting shows that as of July 23, the national average price of live pigs in the market has risen to 19.4 yuan/kg.

However, this cannot stop institutions from choosing to exit early, which has occurred many times in other industries' boom investments, and the same is true for fund shareholding changes in the second quarter of this year.

Taking the listed companies included in the Wind pig industry as the observation sample, at the end of the second quarter of this year, the arithmetic mean and median of the fund shareholding ratio were 4.81% and 2.03% respectively, setting a new low since the 2021 semi-annual report.

Among them, breeding companies where institutional chips were previously concentrated were sold off in a concentrated manner. The fund shareholding ratio of Xinwufeng dropped sharply from 39.85% in the fourth quarter of 2023 to 6.17% at the end of the second quarter, ranking first in the industry. During the same period, the fund shareholding ratio of Huatong Shares, Tangrenshen and Superstar Agriculture and Animal Husbandry also fell by more than 21 percentage points.

The direction of the change in the holdings of the above funds is consistent with the trend of the secondary market. The companies where the above funds concentrated their reductions are also the stocks with the largest declines within the industry after the rebound in pork prices this year.

Profitability remains difficult

Since the second quarter, domestic pig output has peaked and declined, driving pork prices to continue to rise.

Combined with the reduction in costs of some breeding companies, their profit margins have shown a trend of expanding month by month, and are ultimately reflected in the first-half performance forecasts that were recently released.

However, the above-mentioned rebound in pork prices was anticipated by the industry as early as the second half of last year, and funds that have been tracking the industry for a long time have also made arrangements in advance.

This can be seen from the continuous data of fund holdings compiled by Wind. Due to the differences in the disclosure of fund holdings in regular reports, the fund holdings data in the first and third quarter reports will be less, so the semi-annual report and the annual report are more comparable.

From the comparison of semi-annual and annual reports, the fund has increased its holdings of relevant listed companies in the first half of 2023. The average shareholding ratio of the current funds in the above 26 sample companies increased from 6.08% at the end of 2022 to 8.32% at the end of the second quarter of last year, and further increased to 10.74% at the end of 2023.

Compared with historical data, the average shareholding ratio of more than 10% also hit a new high since 2018, and the intensity of institutional holdings has increased significantly compared with 2022.

Subsequently, pork prices rebounded as expected in the first half of the year, but the funds chose to withdraw quickly. As of the end of June this year, the average shareholding ratio of the above funds fell again to 4.81%, returning to the low point of the bottom cycle of pork prices in the past three years.

The reason for this is, on the one hand, that professional institutions focus on expectations and the trading characteristics of the funds themselves; on the other hand, it is also related to the current industry, the cyclical position of pork prices, and the expectations for future corporate profits.

First of all, the pig farming industry has entered the final stage of capacity reduction. Although the supply and demand relationship has not yet fully recovered to balance, the space for subsequent capacity reduction is shrinking.

Secondly, starting from May this year, breeding companies began to cross the break-even line on a large scale. In June, the pig price rose to the market target price of 18 yuan/kg, and the subsequent room for growth has decreased accordingly.

Finally, it is difficult for pork prices to return to their historical highs in 2019, and entering the "low-profit era" has almost become a consensus in the industry, which means that there is an upper limit to the profit margins and profitability of breeding companies.

In fact, even professional institutions find it difficult to make a profit, and may even incur losses in the above-mentioned "pig cycle" bottom-fishing transactions.

Because, although the stock price and pork price trends show positively correlated fluctuations, there are obvious differences in their operating rhythms. Stock prices are more affected by market expectations, funds and other factors, while commodity prices are relatively lagging behind.

Taking the Wind Pig Industry Index, which tracks the above-mentioned stocks, as an example, this year's operating range and price center of gravity are significantly lower than last year. The index only successfully stopped falling in February this year. At the same time, the rebound range and duration from March to May were also relatively limited.

In June this year, the index lost all the gains in the first half of the year and approached the previous low. Combined with the trend of the index, it is also possible that institutions failed to buy at the bottom and passively reduced their holdings.

Many similarities

"Keep to the right and do something surprising" is a common term in sell-side strategies. "Right" refers mainly to industry leaders and blue chip stocks, while "surprising" refers generally to small and medium-sized companies with high growth expectations.

Against the backdrop of the above-mentioned fund withdrawal, the holdings of industry-leading funds were able to remain relatively stable, while small and medium-sized breeding companies became the focus of share reduction and showed many similarities.

In this regard, our newspaper recently reported that the situation of Huatong Shares is very similar to that of Superstar Agriculture and Animal Husbandry. The two companies have too many similarities in terms of stock price trends and chip structures. They both achieved a far higher growth rate than their peers at the bottom of the industry, and they both welcomed fund entry in the fourth quarter of 2021, and the fund holdings are also highly controlled.

There are more cases of similar highly concentrated fund chips.

Wind data shows that at the end of 2023, the fund holdings of four companies, namely New Wufeng, Huatong Shares, Tangrenshen and Superstar Agriculture and Animal Husbandry, exceeded 33%. By the end of the second quarter of this year, the fund holdings of these companies generally dropped to around 13%, or even lower.

Among them, New Wufeng's shareholding declined the most, from 39.85% at the end of last year to 6.17% at the end of the second quarter. The fund's shareholding ratio fell by more than 33 percentage points.

During the same period, the shareholding ratios of Huatong Holdings, Tangrenshen and Superstar Agriculture and Animal Husbandry also generally decreased by more than 21 percentage points.

Perhaps affected by the concentrated withdrawal of funds, the decline of the above companies is significantly higher than the industry average. According to statistics, from April to now, the average decline of 26 sample companies in the pig industry is 18.75%. During the same period, New Wufeng, Superstar Agriculture and Animal Husbandry, and Huatong Shares fell by 39.4%, 39.3%, and 36.8% respectively, ranking second to fourth. Only Tangrenshen's decline was lower than the above industry average.

Comparing the shareholding details of the above companies, it can also be seen that the shareholding institutions are also highly similar.

At the end of last year, the top three institutions holding shares of Xinwufeng were China Europe Fund, China Merchants Fund and Morgan Fund. During the same period, the top three institutions holding shares of Huatong shares were Zhonggeng Fund, China Merchants Fund and Morgan Fund. The top three institutions holding shares of Tangrenshen were Fuwu Fund, Yinhua Fund and Morgan Fund. The top three institutions holding shares of Superstar Agriculture and Animal Husbandry were China Europe Fund, GF Fund and Morgan Fund.

Further tracking of specific fund products shows that Morgan Health Quality Life C appears in the shareholding lists of the above four companies. At the same time, this fund is also the product with the largest shareholding scale among Morgan funds.

Judging from the latest shareholding situation, some of the above-mentioned institutions have undergone major changes.

Taking Huatong Shares as an example, at the end of 2023, Zhonggeng Fund held as many as 46.7633 million shares, which decreased to 30.2281 million shares at the end of the first quarter of this year. By the end of the second quarter of this year, the fund did not appear in the shareholding details.

In addition, Wells Fargo Fund, which held as many as 55.82 million shares of Tangrenshen at the end of last year, also disappeared from the former's shareholding list in the second quarter.